Bank of America Corporation (BAC) — Undervalued With Poor Growth Indicators
Bank of America shares moved -5.4% over the last 52 weeks, with a high of $37.0 and a low of $24.96. During this time, the stock lagged the S&P 500 index by -20.8%. As of April 2023, the company's 50-day average price is $27.97. 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 Finance company has 213,000 full time employees and is based in Charlotte, NC. Bank of America has returned a 2.9% dividend yield over the last 12 months.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $91,020 | $91,244 | $85,528 | $89,113 | $94,950 | $119,708 |
| Revenue Growth | n/a | 0.25% | -6.26% | 4.19% | 6.55% | 26.07% |
| Interest Income (MM) | $48,162 | $48,891 | $43,360 | $42,934 | $52,462 | $62,042 |
| Operating Margins | 38% | 36% | 22% | 38% | 33% | 28% |
| Net Margins | 31% | 30% | 21% | 36% | 28% | 25% |
| Net Income (MM) | $28,147 | $27,430 | $17,894 | $31,978 | $27,528 | $30,503 |
| Depreciation & Amort. (MM) | $538 | $1,729 | $1,843 | $1,898 | $1,978 | $2,032 |
| Earnings Per Share | $2.61 | $2.75 | $1.87 | $3.57 | $3.19 | $3.57 |
| EPS Growth | n/a | 5.36% | -32.0% | 90.91% | -10.64% | 11.91% |
| Diluted Shares (MM) | 10,237 | 9,443 | 8,797 | 8,558 | 8,168 | 7,980 |
| Share Price | $26.43 | $26.88 | $24.5 | $38.53 | $38.88 | $30.96 |
| P/E Ratio | 10.01 | 9.7 | 13.03 | 10.7 | 12.11 | 8.6 |
| Free Cash Flow (MM) | $39,520 | $61,777 | $37,993 | -$7,193 | -$6,327 | $43,256 |
| Entreprise Value (MM) | $339,027 | $355,917 | $116,245 | $282,896 | $388,172 | $224,136 |
| EV / EBITDA | 9.65 | 10.32 | 5.58 | 7.89 | 11.78 | 6.38 |
| Total Debt (MM) | $249,581 | $265,060 | $282,255 | $303,870 | $302,914 | $330,555 |
| Net Debt / EBITDA | 2.06 | 3.0 | -4.71 | -1.24 | 2.21 | -0.6 |
| Current Ratio | 8.84 | 7.79 | 6.93 | 9.38 | 15.59 | 16.5 |
The Market May Be Undervaluing Bank of America's Assets and Equity:
Compared to the Finance sector's average of 12.38, Bank of America has a trailing twelve month P/E ratio of 7.8 and, according to its EPS guidance of $3.26, an expected P/E ratio of 8.6. Bank of America's PEG ratio is 2.43 based on its 3.2% compound average growth rate of historical and projected earnings per share. This suggests that the company's shares are overvalued. However, Bank of America is possibly undervalued in terms of its book value because its P/B ratio is 0.95 compared to its sector average of 1.58. As of the date of publication, the company's shares are trading -42.6% below their Graham number of $53.98.
There's an Analyst Consensus of Some Upside Potential for Bank of America:
25 analysts are following Bank of America and have set target prices ranging from $28.0 to $51.0 per share. On average, they have given the company a rating of buy. At the current price of $27.97, BAC is trading -17.7% away from its average analyst target price of $33.98 per share, implying an analyst consensus of some upside potential for the stock. The company has a very low short interest since 1.0% 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 0.11%. which is a small amount of insider investors. The company's biggest shareholder is Berkshire Hathaway, Inc with a 13% stake in the company worth $31,977,097,160.
