On a simple model controlling for expected ROE and EPS growth, RHC and COH look quite expensive.
But this is a within sector regression framework and tells you nothing about how expensive, or otherwise, the sector is.
And on that basis, we see a stock like FPH, a truly best-in-class type company, trading at 41x forward earnings. Trailing looks a lot better (albeit still 31x!) but that’s on COVID-inflated earnings.
41x in a market thinking about rates and duration is, well, quite rich, in our view.
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