MCY
Mercury General Corporation
$101.03
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 26.3% below fair value
You pay
$101.03
Bear
$97.74
Fair
$137.15
Bull
$178.30
Bear
$97.74
-3.3%
ROTCE 20.0% → 2.93x TBV
Fair
$137.15
+35.8%
ROTCE 25.0% → 4.00x TBV
Bull
$178.30
+76.5%
ROTCE 30.0% → 4.00x TBV
Key Value Driver
ROTCE (26.9%) vs. cost of equity (9.5%)
Implied Market Multiple
2.79x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $90.00 from 7 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $137.15 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.
Wall Street's average price target is $90.00 (from 7 analysts). Our estimate is 65% above 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