We assess Bank of America's value by looking at:
- Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
- Is the PE ratio less than the market average, and/ or less than the Banks industry average (and greater than 0)? (2 checks)
- Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
- Is the PB ratio less than the Banks industry average (and greater than 0)? (1 check)
Bank of America has a total score of 3/6, see the detailed checks below.
Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (11.71%).
Full details on the Value part of the Simply Wall St company analysis model.
Discounted cash flow (Dividend Discount Model)
The calculations below outline how an intrinsic value for Bank of America is arrived at by discounting future dividends to their present value. This approach is used for finance firms where free cash flow is difficult to estimate (e.g. Banks/ Insurance firms).
If the firm does not pay the majority of its earnings out as a dividend this method will often arrive at a value significantly lower than the share price.
See our documentation to learn about this calculation.
Value of the stock
Value = Expected dividends per share / (Discount Rate - Perpetual growth rate)
$5 = ($0.39 / (10.13% - 2.33%)
Value per share:
Current discount (share price of $25.16): -403%
Estimate of Discount Rate
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 10.13% = 2.33% + (1.016 * 7.67%)
Estimate of Bottom Up Beta
The Levered is used in the case of financial firms, but it is not adjusted for financial leverage like with non-finance firms. Therefore the average levered beta from comparable firms is used as the bottom-up beta. It is limited to 0.8 to 2.0 (practical range for a stable firm).
Average Levered Beta from peers = 1.016
Levered Beta used in calculation = 1.016
- The risk free rate of 2.33% is from the 10 year government bond rate in US.
- The bottom-up beta is estimated by analysing other companies in the same industry.
- The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
- The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.
How is Bank of America expected to perform in the next 1 to 3 years based on estimates from 12 analysts?
The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.
Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Expected earnings growth over 3 years.
Future Earnings growth analysis
Is Bank of America expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.
Are Bank of America's annual earnings growth expected to exceed 3.4% over the next 3 years?
- After 1 year
- After 3 years
1 & 3 year estimated growth in earnings
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Analysts growth expectations
2 year growth check
Which of the these is expected to increase by over 50% in 2 year's time?
- Cash flow data unavailable.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
- Bank of America is not expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be below 20%.
Improvement & Relative to industry
- Expected to be above the Banks industry average.
- An improvement in Bank of America's performance (ROE) is expected over the next 3 years.
Future performance checks
We assess Bank of America's future performance by looking at:
- Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
- Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
- Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
- Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
- Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Bank of America has a total score of 2/6, see the detailed checks below.
Note: If no +3 year data is available, +2.5 year data may be used.
Note 2: We use GAAP per Share in all our calculations.
Full details on the Future part of the Simply Wall St company analysis model.
How has Bank of America performed over the past 5 years?
The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Bank of America's growth in the last year to its industry (Banks).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
- Bank of America's earnings growth has exceeded the industry average over the past year.
- Bank of America's 1 year earnings growth is less than its 5 year annual average (26.4% vs 61.6%).
- Bank of America has improved earnings in the past 5 years.
Bank of America's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
- Poor return on shareholders funds (ROE) last year.
- Bank of America performed worse than the Banks industry average based on return on assets (ROA) last year.
- Performance based on revenue producing assets (ROCE) is broadly the same over 3 years.
Past performance checks
We assess Bank of America's performance over the past 5 years by checking for:
- Has earnings per share (EPS) increased in past 5 years? (1 check)
- Has the EPS growth in the last year exceeded that of the Banks industry? (1 check)
- Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
- Is the Return on Equity (ROE) higher than 20%? (1 check)
- Is the Return on Assets (ROA) above industry average? (1 check)
- Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Bank of America has a total score of 3/6, see the detailed checks below.
Note: We use GAAP Earnings per Share in all our calculations.
Full details on the Past part of the Simply Wall St company analysis model.
How is Bank of America's financial position? (This company is analysed differently as a bank or financial institution)
This company is a bank or financial institution.
Fundamentally a bank's business is based upon borrowing and lending money, for this reason they typically have high levels of debt and we analyse them differently.
This treemap shows a more detailed breakdown of Bank of America's finances.
If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
This company is a bank or financial institution, which is analysed accordingly below.
Below we check the amount of loans the bank has, how many of those are bad, and its ability to cover any bad loans.
- Acceptable proportion of non-loan assets held.
- Liabilities are made up of primarily low risk sources of funding.
- Loans are broadly funded by customer deposits.
- The banks level of assets compared to its equity is low (i.e. an appropriate level of borrowing to fund lending).
- High level of bad loan coverage.
- Acceptable level of bad loan write offs (less than 2%).
Financial health checks (Bank)
We assess Bank of America's financial health as a bank by checking for:
Full details on the Health part of the Simply Wall St company analysis model.
- Leverage (Assets to Equity > 20x)? (1 check)
- Coverage of bad loans (Bad Loan Coverage > 100%)? (1 check)
- Proportion of lower risk deposits compared to total funding (Deposits to Liabilities < 50%)? (1 check)
- Proportion of higher risk assets compared to total assets (Loans to Assets > 110%)? (1 check)
- Total loans compared to deposit funding (Loans to Deposits > 125%)? (1 check)
- Level of bad loans (Net Charge Off Ratio > 3%)? (1 check)
Bank of America has a total score of 6/6, see the detailed checks below.
What is Bank of America's current dividend yield, its reliability and sustainability?
Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Current annual income from Bank of America dividends. Estimated to be 2.28% next year.
If you bought $2,000 of Bank of America shares you are expected to receive $39 in your first year as a dividend.
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account?
It is up there with the best dividend paying companies?
- Paying below low risk savings rate. (2.25%)
- Paying below the markets top dividend payers. (3.18%)
Historical dividend yield
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.
We also check to see if the dividend has increased in the past 10 years.
- Dividends per share have been volatile in the past 10 (annual drop of over 10%).
- Dividends per share have fallen over the past 10 years.
Current Payout to shareholders
What portion of Bank of America's earnings are paid to the shareholders as a dividend.
- Dividends paid are well covered by net profit (4.3x coverage).
Future Payout to shareholders
- Dividends after 3 years are expected to be well covered by net profit (3.3x coverage).
Income/ dividend checks
We assess Bank of America's dividend by checking for:
Full details on the Dividends part of the Simply Wall St company analysis model.
- Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
- Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
- Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
- If they have paid a dividend for 10 years has it increased in this time? (1 check)
- How sustainable is the dividend, can Bank of America afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
Bank of America has a total score of 2/6, see the detailed checks below.
What is the CEO of Bank of America's salary, the management and board of directors tenure and is there insider trading?
Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
Mr. Brian T. Moynihan has been the Chief Executive Officer and Director of Bank of America Corporation since January 01, 2010 and has been its Chairman since October 01, 2014. Mr. Moynihan has been the President of Bank of America Corporation since January 01, 2010. He serves as the General Partner of Bofa Merrill Lynch Preferred Capital Trust III, BofA Merrill Lynch Preferred Capital Trust IV, BofA Merrill Lynch Preferred Funding IV LP, BofA Merrill Lynch Preferred Funding III LP, BofA Merrill Preferred Capital Trust V and BofA Merrill Lynch Preferred Funding V LP. He served as the President of Global Banking & Wealth Management of Bank of America Corporation since January 2010. His direct support of diversity and inclusion initiatives across Bank of America is instrumental in creating an inclusive work environment. Mr. Moynihan served as the Chief Executive Officer of Merrill Lynch & Co., Inc. He served as the Director of Operation at Qualsec since September 2008. Mr. Moynihan served as the President at Global Wealth & Investment Management at Banc of America Investment Services, Inc. He served as the President at Fleet National Bank. Mr. Moynihan served as General Counsel at Bank of America Corporation from December 2008 to January 2010 and also as its Head of Consumer Banking from August 2009 to January 2010. He served as the President of Global Wealth and Investment Management at Bank of America Corporation from April 2004 to October 2007. Mr. Moynihan served as the President of Global Banking, Global Wealth & Investment Management at Bank of America Corporation since January 2009 and served as its President of Global Corporate and Investment Banking from October 2007 to October 2, 2008 and President of Private Equity & Global Operations from October 2, 2008 to January 2009. He managed Bank of America Corporation's third-party, nonproprietary and open architecture investment product platforms. Mr. Moynihan joined Bank of America in 2004. He served as an Executive Vice President of Wealth Management and Brokerage at FleetBoston Financial Corporation from 2000 to April 2004. Mr. Moynihan served as the Managing Director of Corporate Strategy and Development at FleetBoston Financial Corp. since 1994 and its Senior Vice President since 1998. He served as Fleet's eCatalyst from 2000 to 2001 and was responsible for driving the development and implementation of Fleet's Internet strategy. His responsibilities included oversight of all mergers & acquisitions, including the merger of Fleet Financial Group and BankBoston Corporation and Fleet's earlier acquisitions of Quick & Reilly, Columbia Management, Shawmut National Corporation, NatWest Bank's US Operations, Sanwa Business Credit and others. Mr. Moynihan joined Fleet Financial Group in April 1993 as the Deputy General Counsel. He serves as the Chairman and a Director of Boy's And Girl's Clubs of Boston Inc. He served as the Chairman of the Crossroads Rhode Island and Providence Haitian Project Inc. He served as the Chairman of the Board and Director at Merrill Lynch & Co., Inc. Mr. Moynihan serves as a Director of Bank of America N.A., United Way of Mass Bay (also known as United Way of Massachusetts Bay Inc.), YouthBuild Boston Inc., and FIA Card Services, N.A. In 2010, Mr. Moynihan was elected as a Trustee of the Corporation of Brown University. He served as a Director of BlackRock Inc. since February 2009. Mr. Moynihan has been chairing Bank of America's Global Diversity and Inclusion Council since 2007 and is an Executive Champion of its Disabilities Affinity Group for Bank of America associates. He holds BA from Brown University in 1981 and JD from University of Notre Dame Law School in 1984. Mr. Moynihan has a B.Ph. and an M.A. from Miami University.
- CEO's compensation has been consistent with company performance over the past year.
- CEO's compensation appears reasonable.
Management Team Tenure
Average tenure of the Bank of America management team:
- The tenure for the Bank of America management team is about average.
Chief Financial Officer
Chief Operating Officer
Vice Chairman and Head of Global Wealth & Investment Management
Chief Risk Officer
Chief Investment Officer
Board of Directors Tenure
Average tenure of the Bank of America board of directors:
- The tenure for the Bank of America board of directors is about average.
Board of Directors
Lead Independent Director
Recent Insider Trading
- Bank of America insiders have sold more shares than they have bought in the past 3 months.
Who owns this company?
We assess Bank of America's management by checking for:
- Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
- Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
- Is the average tenure of the management team less than 2 years? (1 check)
- Is the average tenure of the board of directors team less than 3 years? (1 check)
Bank of America has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.
Note: We use the top 6 management executives and board members in our calculations.
Note 2: Insider trading include any internal stakeholders and these transactions
Full details on the Management part of the Simply Wall St company analysis model.
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. It operates through four segments: Consumer Banking, Global Wealth & Investment Management, Global Banking, and Global Markets. The Consumer Banking segment offers traditional and money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, and investment accounts and products, as well as credit and debit cards, residential mortgages and home equity loans, and direct and indirect loans. This segment provides its products and services through approximately 4,600 financial centers, 15,900 ATMs, call centers, and online and mobile platforms. The Global Wealth & Investment Management segment offers investment management, brokerage, banking, and retirement products, as well as wealth management and customized solutions. The Global Banking segment provides lending products and services, including commercial loans, leases, commitment facilities, trade finance, real estate lending, and asset-based lending; treasury solutions, such as treasury management, foreign exchange, and short-term investing options; working capital management solutions; and debt and equity underwriting and distribution, and merger-related and other advisory services. The Global Markets segment offers market-making, financing, securities clearing, settlement, and custody services, as well as risk management, foreign exchange, fixed-income, and mortgage-related products. Bank of America Corporation was founded in 1874 and is based in Charlotte, North Carolina.
Bank of America Corporate Center, Charlotte, 28255, United States
Bank of America employees.