LOB
Live Oak Bancshares, Inc.
$35.35
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 44.8% above fair value
You pay
$35.35
Bear
$17.09
Fair
$24.42
Bull
$31.75
Bear
$17.09
-51.6%
ROTCE 6.2% → 0.30x TBV
Fair
$24.42
-30.9%
ROTCE 8.3% → 0.43x TBV
Bull
$31.75
-10.2%
ROTCE 9.5% → 0.55x TBV
Adjust Assumptions
8.3%
14.0%
Key Value Driver
ROTCE (8.3%) vs. cost of equity (14.0%)
Implied Market Multiple
1.31x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (10 analysts)
$39.50
Divergence from AlphaVal
38%
Summary
With ROTCE of 8.3% vs. 14.0% cost of equity, fair P/TBV is 0.43x on $27.00 tangible book, implying $24.42 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 $39.50 (from 10 analysts). Our estimate is 38% 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