Bank of America Corporation (BAC) - Fairly Valued With Moderate Growth Prospects
Bank of America shares moved -26.4% over the last 52 weeks, with a high of $50.11 and a low of $29.31. During this time, the stock lagged the S&P 500 index by -5.6%. Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. The large-cap Financial Services company has 213,000 full time employees and is based in Charlotte, NC. Bank of America has returned a 2.6% dividend yield over the last 12 months.
The Business Has Strong Net Margins With a Positive Growth Rate:
| 2018-12-31 | 2019-12-31 | 2020-12-31 | 2021-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $91,247 | $91,244 | $85,528 | $89,113 |
| Revenue Growth | n/a | -0.0% | -6.26% | 4.19% |
| Net Margins | 30.85% | 30.06% | 20.92% | 35.88% |
| Net Margins Growth | n/a | -2.56% | -30.41% | 71.51% |
| Earnings Per Share | $2.61 | $2.75 | $1.87 | $3.57 |
| EPS Growth | n/a | 5.36% | -32.0% | 90.91% |
| Free Cash Flow (MM) | $39,520 | $61,777 | $37,993 | -$7,193 |
| FCF Growth | n/a | 56.32% | -38.5% | -118.93% |
| LT Debt to Equity | 0.94 | 1.0 | 1.06 | 1.14 |
Bank of America has Attractive P/E and P/B Ratios and Trades Below Its Graham Number:
Compared to the Financial Services sector's average of 13.34, Bank of America has a trailing twelve month price to earnings (P/E) ratio of 10.5 and, based on its EPS guidance of 3.65, an expected P/E ratio of 9.1.
The firm's price to earnings growth (PEG) is 1.74, which indicates that it is overvalued in terms of its expected rate of earnings growth.
Bank of America is undervalued in terms of its assets because its price to book (P/B) ratio is 1.1 compared to its sector average of 1.95. As of the date of publication, the company's shares are trading -28.2% below their Graham number, implying there is a margin of safety for the stock. The Graham number is calculated according to the forumla:
√(22.5 * TTM earnings per share * book value per share) = √(22.5 * 3.16 * 29.957) = $46.15
Bank of America Has an Average Rating of Buy and an Analyst Consensus of Some Upside Potential:
25 analysts are following Bank of America and have set target prices ranging from $32 to $52 per share. On average, they have given the company a rating of buy. At the current price of $33.14, BAC is trading -19.07% away from its average analyst target price of $40.95 per share, implying an analyst consensus of some upside potential for the stock.
The company has a very low short interest since 0.7% of the company's shares are tied to short positions. Institutions own 71.0% of Bank of America's shares, while the insider ownership rate stands at 0.14%. The biggest shareholder is Berkshire Hathaway, Inc with a 13% stake in the company worth approximately $33,474,733,466.
