SLM
SLM Corporation
$24.61
Banks, Insurers & Asset Managers
80%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 52.6% below fair value
You pay
$24.61
Bear
$36.34
Fair
$51.92
Bull
$67.50
Bear
$36.34
+47.7%
ROTCE 20.0% → 2.79x TBV
Fair
$51.92
+111.0%
ROTCE 25.0% → 4.00x TBV
Bull
$67.50
+174.3%
ROTCE 30.0% → 4.00x TBV
Key Value Driver
ROTCE (31.1%) vs. cost of equity (9.7%)
Implied Market Multiple
1.94x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $30.80 from 25 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $51.92 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: $26.69 (55% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $30.80 (from 25 analysts). Our estimate is 91% 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