MORN
Morningstar, Inc.
$224.89
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 94.7% above fair value
You pay
$224.89
Bear
$88.02
Fair
$115.52
Bull
$130.29
Bear
$88.02
-60.9%
ROTCE 20.0% → 2.70x TBV
Fair
$115.52
-48.6%
ROTCE 25.0% → 3.55x TBV
Bull
$130.29
-42.1%
ROTCE 30.0% → 4.00x TBV
Adjust Assumptions
30.6%
9.9%
Key Value Driver
ROTCE (30.6%) vs. cost of equity (9.9%)
Implied Market Multiple
6.9x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (6 analysts)
$227.33
Divergence from AlphaVal
49%
Summary
With ROTCE of 30.6% vs. 9.9% cost of equity, fair P/TBV is 3.55x on $32.57 tangible book, implying $115.52 per share. DDM cross-check: $68.23.
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: $68.23 (41% 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 49% 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