PB
Prosperity Bancshares, Inc.
$71.99
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Fair Value
Trading 20.5% below fair value
You pay
$71.99
Bear
$58.25
Fair
$90.56
Bull
$109.94
Bear
$58.25
-19.1%
ROTCE 10.0% → 1.55x TBV
Fair
$90.56
+25.8%
ROTCE 13.4% → 2.42x TBV
Bull
$109.94
+52.7%
ROTCE 15.4% → 2.93x TBV
Key Value Driver
ROTCE (13.4%) vs. cost of equity (7.9%)
Implied Market Multiple
1.79x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $74.75 from 33 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $90.56 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.
Dividend-based valuation: $50.61 (48% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $74.75 (from 33 analysts). Our estimate is 30% above 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