What is IBTX's Intrinsic value?

Independent Bank Group Inc (IBTX) Intrinsic Value Analysis

Executive Summary

As of June 9, 2025, Independent Bank Group Inc's estimated intrinsic value ranges from $37.84 to $37.84 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $37.84 -37.6%

Is Independent Bank Group Inc (IBTX) undervalued or overvalued?

With the current market price at $60.67, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Independent Bank Group Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.79 0.9
Cost of equity 7.5% 9.9%
Cost of debt 5.0% 5.0%
Tax rate 20.3% 20.3%
Debt/Equity ratio 0.13 0.13
After-tax WACC 7.1% 9.2%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.7%
  • Long-term growth rate: 4.0%
  • Fair value: $37.84 (-37.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.9% (Low) to 7.5% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(101) to $(354)
  • Selected fair value: $-227.47 (-474.9% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $2514M
Enterprise Value $3024M
Trailing P/E 0.00
Forward P/E 46.74
Trailing EV/EBITDA 0.00
Current Dividend Yield 250.04%
Dividend Growth Rate (5Y) 9.70%
Debt-to-Equity Ratio 0.13

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 100% $7.57
Weighted Average 100% $37.84

Investment Conclusion

Based on our comprehensive valuation analysis, Independent Bank Group Inc's weighted average intrinsic value is $37.84, which is approximately 37.6% below the current market price of $60.67.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.13)
  • Historical dividend growth of 9.70%

Given these factors, we believe Independent Bank Group Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.