STEL
Stellar Bancorp, Inc.
$37.47
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Overvalued
Trading 39.7% above fair value
You pay
$37.47
Bear
$15.10
Fair
$26.82
Bull
$33.85
Bear
$15.10
-59.7%
ROTCE 7.0% → 0.70x TBV
Fair
$26.82
-28.4%
ROTCE 9.3% → 1.24x TBV
Bull
$33.85
-9.7%
ROTCE 10.8% → 1.57x TBV
Key Value Driver
ROTCE (9.3%) vs. cost of equity (8.3%)
Implied Market Multiple
1.73x
Summary
With ROTCE of 9.3% vs. 8.3% cost of equity, fair P/TBV is 1.24x on $21.61 tangible book, implying $26.82 per share. DDM cross-check: $10.52.
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: $10.52 (61% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
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