MS-PQ
Morgan Stanley
$25.30
Banks, Insurers & Asset Managers
90%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 87.8% below fair value
You pay
$25.30
Bear
$144.69
Fair
$206.70
Bull
$268.71
Bear
$144.69
+471.9%
ROTCE 14.2% → 1.46x TBV
Fair
$206.70
+717.0%
ROTCE 19.0% → 2.14x TBV
Bull
$268.71
+962.1%
ROTCE 21.8% → 2.54x TBV
Key Value Driver
ROTCE (19.0%) vs. cost of equity (11.0%)
Implied Market Multiple
0.45x
Summary
With ROTCE of 19.0% vs. 11.0% cost of equity, fair P/TBV is 2.14x on $56.55 tangible book, implying $206.70 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.
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