MORN
Morningstar, Inc.
$193.00
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 63.0% above fair value
You pay
$193.00
Bear
$90.20
Fair
$118.38
Bull
$130.29
Bear
$90.20
-53.3%
ROTCE 20.0% → 2.77x TBV
Fair
$118.38
-38.7%
ROTCE 25.0% → 3.63x TBV
Bull
$130.29
-32.5%
ROTCE 30.0% → 4.00x TBV
Adjust Assumptions
30.6%
9.8%
Key Value Driver
ROTCE (30.6%) vs. cost of equity (9.8%)
Implied Market Multiple
5.93x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (6 analysts)
$227.33
Divergence from AlphaVal
48%
Summary
With ROTCE of 30.6% vs. 9.8% cost of equity, fair P/TBV is 3.63x on $32.57 tangible book, implying $118.38 per share. DDM cross-check: $71.50.
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: $71.50 (40% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $227.33 (from 6 analysts). Our estimate is 48% 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