Can Bank of America (BAC) Still Be Undervalued Here?

Résumé détaillé

Bank of America has pulled back in the short term yet still carries a sizeable 3 year return, so the real question for you is whether the price now fairly reflects the returns the…

Bank of America has pulled back in the short term yet still carries a sizeable 3 year return, so the real question for you is whether the price now fairly reflects the returns the bank earns on its capital.

The issue now is whether those returns on capital are strong and durable enough to justify where Bank of America shares trade today.

If you are weighing Bank of America against other ways to put capital to work in the banking theme, it can help to compare it with 32 high quality undervalued stocks.

The Excess Returns model evaluates how efficiently Bank of America converts its equity base into profits above its own cost of capital. Based on the inputs here, book value per share of $39.26 is assumed to move toward a stable $43.07, with stable EPS of $5.31 per share supported by an average return on equity of 12.32%. The model uses a cost of equity of $3.92 per share, which implies an excess return of $1.39 per share that is treated as the economic value created over and above the required return.

This stream of excess returns is what produces an estimated intrinsic value that the model indicates is meaningfully above the current share price of $50.67. The pending settlement over unauthorized accounts is one factor that may help explain why the market may be reluctant to fully credit those projected returns on equity. You can see the full Excess Returns breakdown and how that compares to other banking stocks in. Find out what Bank of America could be worth using our Excess Returns estimate.

Bank of America's valuation puzzle only really makes sense once you spell out the story behind it. This is where Simply Wall St Narratives come in as a link between the current price and the future assumptions on growth, margins and earnings that would need to hold for the stock to be worth meaningfully more or less than it is today.

This Narrative is the analyst consensus Narrative on Simply Wall St, which compiles analysts' consensus price target and revenue and earnings forecasts…

B…

Début de l'article, extrait de Yahoo Finance. Pour lire la suite, ouvrez l'article chez le média.