What is TCF's Intrinsic value?

TCF Financial Corp (TCF) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, TCF Financial Corp's estimated intrinsic value ranges from $23.73 to $42.96 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $23.73 -47.5%
Dividend Discount Model (Stable) $42.96 -4.9%

Is TCF Financial Corp (TCF) undervalued or overvalued?

With the current market price at $45.18, 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 TCF Financial Corp'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 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 1.06 1.17
Cost of equity 7.7% 10.3%
Cost of debt 5.0% 5.0%
Tax rate 14.5% 18.2%
Debt/Equity ratio 0.19 0.19
After-tax WACC 7.1% 9.3%

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: 74.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.0%
  • Long-term growth rate: 4.0%
  • Fair value: $23.73 (-47.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.3% (Low) to 7.7% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $19 to $67
  • Selected fair value: $42.96 (-4.9% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $6897M
Enterprise Value $7783M
Trailing P/E 23.44
Forward P/E 29.69
Trailing EV/EBITDA 0.00
Current Dividend Yield 325.95%
Dividend Growth Rate (5Y) 46.04%
Debt-to-Equity Ratio 0.19

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) 57% $4.75
Dividend Discount Model (Stable) 43% $6.44
Weighted Average 100% $31.97

Investment Conclusion

Based on our comprehensive valuation analysis, TCF Financial Corp's weighted average intrinsic value is $31.97, which is approximately 29.2% below the current market price of $45.18.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.19)
  • Historical dividend growth of 46.04%

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