RY
Royal Bank of Canada
$212.38
Banks, Insurers & Asset Managers
90%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Overvalued
Trading 23.5% above fair value
You pay
$212.38
Bear
$116.82
Fair
$171.99
Bull
$205.09
Bear
$116.82
-45.0%
ROTCE 13.6% → 1.77x TBV
Fair
$171.99
-19.0%
ROTCE 18.1% → 2.60x TBV
Bull
$205.09
-3.4%
ROTCE 20.9% → 3.11x TBV
Key Value Driver
ROTCE (18.1%) vs. cost of equity (9.4%)
Implied Market Multiple
3.71x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $225.00 from 30 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $171.99 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: $106.76 (28% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $225.00 (from 30 analysts). Our estimate is 34% below the consensus -- consider that gap carefully.
Financial statements were converted from CAD into USD using USDCAD at 0.7093 USD per CAD.
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