SLM
SLM Corporation
$27.32
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 46.9% below fair value
You pay
$27.32
Bear
$35.98
Fair
$51.41
Bull
$66.83
Bear
$35.98
+31.7%
ROTCE 20.0% → 2.85x TBV
Fair
$51.41
+88.2%
ROTCE 25.0% → 4.00x TBV
Bull
$66.83
+144.6%
ROTCE 30.0% → 4.00x TBV
Key Value Driver
ROTCE (31.1%) vs. cost of equity (9.6%)
Implied Market Multiple
2.15x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $28.75 from 25 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $51.41 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: $8.64 (85% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $28.75 (from 25 analysts). Our estimate is 105% 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