NNI
Nelnet, Inc.
$136.40
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Fair Value
Trading 21.7% below fair value
You pay
$136.40
Bear
$109.47
Fair
$174.10
Bull
$212.88
Bear
$109.47
-19.7%
ROTCE 9.2% → 1.12x TBV
Fair
$174.10
+27.6%
ROTCE 12.2% → 1.79x TBV
Bull
$212.88
+56.1%
ROTCE 14.1% → 2.19x TBV
Key Value Driver
ROTCE (12.2%) vs. cost of equity (8.6%)
Implied Market Multiple
1.4x
Summary
With ROTCE of 12.2% vs. 8.6% cost of equity, fair P/TBV is 1.79x on $97.36 tangible book, implying $174.10 per share. DDM cross-check: $66.17.
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: $66.17 (62% 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