STEL
Stellar Bancorp, Inc.
$39.32
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 43.2% above fair value
You pay
$39.32
Bear
$15.46
Fair
$27.45
Bull
$34.65
Bear
$15.46
-60.7%
ROTCE 7.0% → 0.72x TBV
Fair
$27.45
-30.2%
ROTCE 9.3% → 1.27x TBV
Bull
$34.65
-11.9%
ROTCE 10.8% → 1.60x TBV
Key Value Driver
ROTCE (9.3%) vs. cost of equity (8.2%)
Implied Market Multiple
1.82x
Summary
With ROTCE of 9.3% vs. 8.2% cost of equity, fair P/TBV is 1.27x on $21.61 tangible book, implying $27.45 per share. DDM cross-check: $10.70.
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: $10.70 (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