What is TFSL's Intrinsic value?

TFS Financial Corp (TFSL) Intrinsic Value Analysis

Executive Summary

As of June 9, 2025, TFS Financial Corp's estimated intrinsic value ranges from $4.34 to $4.77 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $4.34 -67.3%
Dividend Discount Model (Stable) $4.77 -64.1%

Is TFS Financial Corp (TFSL) undervalued or overvalued?

With the current market price at $13.29, 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 TFS 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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.95 1.04
Cost of equity 8.2% 10.7%
Cost of debt 5.0% 5.0%
Tax rate 19.0% 19.2%
Debt/Equity ratio 1 1
After-tax WACC 6.1% 7.4%

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: 72.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.4%
  • Long-term growth rate: 3.5%
  • Fair value: $4.34 (-67.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.7% (Low) to 8.2% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $2 to $7
  • Selected fair value: $4.77 (-64.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $3732M
Enterprise Value $3732M
Trailing P/E 45.73
Forward P/E 44.96
Trailing EV/EBITDA 0.00
Current Dividend Yield 158.74%
Dividend Growth Rate (5Y) 1.52%
Debt-to-Equity Ratio 0.83

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% $0.87
Dividend Discount Model (Stable) 43% $0.71
Weighted Average 100% $4.52

Investment Conclusion

Based on our comprehensive valuation analysis, TFS Financial Corp's weighted average intrinsic value is $4.52, which is approximately 66.0% below the current market price of $13.29.

Key investment considerations:

  • Historical dividend growth of 1.52%

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