NNI
Nelnet, Inc.
$126.52
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 28.3% below fair value
You pay
$126.52
Bear
$110.92
Fair
$176.42
Bull
$215.71
Bear
$110.92
-12.3%
ROTCE 9.2% → 1.14x TBV
Fair
$176.42
+39.4%
ROTCE 12.2% → 1.81x TBV
Bull
$215.71
+70.5%
ROTCE 14.1% → 2.22x TBV
Adjust Assumptions
12.2%
8.6%
Key Value Driver
ROTCE (12.2%) vs. cost of equity (8.6%)
Implied Market Multiple
1.3x
Summary
With ROTCE of 12.2% vs. 8.6% cost of equity, fair P/TBV is 1.81x on $97.36 tangible book, implying $176.42 per share. DDM cross-check: $71.22.
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: $71.22 (60% 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