NNI
Nelnet, Inc.
$128.95
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Fair Value
Trading 22.1% below fair value
You pay
$128.95
Bear
$104.13
Fair
$165.61
Bull
$202.50
Bear
$104.13
-19.3%
ROTCE 9.2% → 1.07x TBV
Fair
$165.61
+28.4%
ROTCE 12.2% → 1.70x TBV
Bull
$202.50
+57.0%
ROTCE 14.1% → 2.08x TBV
Key Value Driver
ROTCE (12.2%) vs. cost of equity (8.8%)
Implied Market Multiple
1.32x
Summary
With ROTCE of 12.2% vs. 8.8% cost of equity, fair P/TBV is 1.70x on $97.36 tangible book, implying $165.61 per share. DDM cross-check: $59.40.
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: $59.40 (64% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
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