LOB
Live Oak Bancshares, Inc.
$37.28
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Overvalued
Trading 34.4% above fair value
You pay
$37.28
Bear
$19.41
Fair
$27.74
Bull
$36.06
Bear
$19.41
-47.9%
ROTCE 6.2% → 0.30x TBV
Fair
$27.74
-25.6%
ROTCE 8.3% → 0.43x TBV
Bull
$36.06
-3.3%
ROTCE 9.5% → 0.55x TBV
Key Value Driver
ROTCE (8.3%) vs. cost of equity (14.0%)
Implied Market Multiple
1.38x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $41.00 from 9 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $27.74 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Return on equity (8.3%) is below the minimum investors require (14.0%). This means the bank is worth less than the net assets on its books.
Wall Street's average price target is $41.00 (from 9 analysts). Our estimate is 40% below the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly