PRAA
PRA Group, Inc.
$14.64
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 63.7% below fair value
You pay
$14.64
Bear
$28.20
Fair
$40.28
Bull
$52.36
Bear
$28.20
+92.6%
ROTCE 4.0% → 0.30x TBV
Fair
$40.28
+175.1%
ROTCE -32.0% → 0.30x TBV
Bull
$52.36
+257.7%
ROTCE -36.8% → 0.30x TBV
Key Value Driver
ROTCE (-32.0%) vs. cost of equity (11.2%)
Implied Market Multiple
0.59x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $25.00 from 13 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $40.28 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.
Return on equity (-32.0%) is below the minimum investors require (11.2%). This means the bank is worth less than the net assets on its books.
Wall Street's average price target is $25.00 (from 13 analysts). Our estimate is 76% 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