LPLA
LPL Financial Holdings Inc.
$330.88
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Overvalued
Trading 16.5% above fair value
You pay
$330.88
Bear
$198.74
Fair
$283.92
Bull
$369.10
Bear
$198.74
-39.9%
ROTCE 12.1% → 2.75x TBV
Fair
$283.92
-14.2%
ROTCE 16.1% → 4.00x TBV
Bull
$369.10
+11.5%
ROTCE 18.6% → 4.00x TBV
Adjust Assumptions
16.1%
7.0%
Key Value Driver
ROTCE (16.1%) vs. cost of equity (7.0%)
Implied Market Multiple
4.95x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (25 analysts)
$412.33
Divergence from AlphaVal
31%
Summary
With ROTCE of 16.1% vs. 7.0% cost of equity, fair P/TBV is 4.00x on $66.82 tangible book, implying $283.92 per share. DDM cross-check: $38.44.
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.
Dividend-based valuation: $38.44 (86% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $412.33 (from 25 analysts). Our estimate is 31% 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