Bank of America Corporation (BAC) — Undervalued With Subpar Growth Factors
Bank of America returned losses of -22.7% last year, with its stock price reaching a high of $40.21 and a low of $26.32. Over the same period, the stock underperformed the S&P 500 index by -17.0%. As of April 2023, the company's 50-day average price was $31.18. 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. Based in Charlotte, NC, the large-cap Finance company has 217,000 full time employees. Bank of America has not offered a dividend during the last year.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue | $91,244,000 | $85,528,000 | $89,113,000 | $94,950,000 |
| Interest Income | $48,891,000 | $43,360,000 | $42,934,000 | $52,462,000 |
| Net Margins | 30.06% | 20.92% | 35.88% | 28.99% |
| Net Income | $27,430,000 | $17,894,000 | $31,978,000 | $27,528,000 |
| Depreciation & Amort. | -$1,729,000 | -$1,843,000 | -$1,898,000 | -$1,978,000 |
| Earnings Per Share | $2.75 | $1.87 | $3.57 | $3.33 |
| Diluted Shares | 9,442,900 | 8,796,900 | 8,558,400 | 7,972,440 |
| Free Cash Flow | $61,777,000 | $37,993,000 | -$7,193,000 | -$6,327,000 |
| Long Term Debt | $240,856,000 | $262,934,000 | $280,117,000 | $275,982,000 |
| Net Debt / EBITDA | 1.16 | -1.63 | -0.65 | 0.77 |
Bank of America Is Potentially Undervalued and Trades Below Its Graham Number:
Bank of America has a trailing twelve month P/E ratio of 9.4, compared to an average of 14.34 for the Finance sector. Based on its EPS guidance of $3.39, the company has a forward P/E ratio of 9.2. The 4.3% compound average growth rate of Bank of America's historical and projected earnings per share yields a PEG ratio of 2.19. This suggests that these shares are overvalued. In contrast, the market is likely undervaluing Bank of America in terms of its equity because its P/B ratio is 0.91 while the sector average is 1.57. The company's shares are currently trading -36.5% below their Graham number.
Analysts Give Bank of America an Average Rating of Buy:
The 22 analysts following Bank of America have set target prices ranging from $28.0 to $47.0 per share, for an average of $36.54 with a buy rating. As of April 2023, the company is trading -14.7% away from its average target price, indicating that there is an analyst consensus of some upside potential.
Bank of America has a very low short interest because 1.4% of the company's shares are sold short. Institutions own 71.7% of the company's shares, and the insider ownership rate stands at 0.11%, suggesting a small amount of insider investors. The largest shareholder is Berkshire Hathaway, Inc, whose 13% stake in the company is worth $30,202,007,734.
