RMT
Royce Micro-Cap Trust, Inc.
$13.74
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 60.4% below fair value
You pay
$13.74
Bear
$24.28
Fair
$34.68
Bull
$45.08
Bear
$24.28
+76.7%
ROTCE 10.4% → 0.92x TBV
Fair
$34.68
+152.4%
ROTCE 13.9% → 1.42x TBV
Bull
$45.08
+228.1%
ROTCE 16.0% → 1.72x TBV
Key Value Driver
ROTCE (13.9%) vs. cost of equity (11.0%)
Implied Market Multiple
1.16x
Summary
With ROTCE of 13.9% vs. 11.0% cost of equity, fair P/TBV is 1.42x on $11.80 tangible book, implying $34.68 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.
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