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. More info.
The calculations below outline how an intrinsic value for Bank of America is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.
In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.
The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.
Note the calculations below are per share.
See our documentation to learn about this calculation.
Excess Returns = (Stable Return on equity – Cost of equity) (Book Value of Equity per share)
$0.35 = (11.12% – 9.79%) * $26.04)
Terminal Value of Excess Returns = Excess Returns / (Cost of Equity - Expected Growth Rate)
$4.73 = $0.35 / (9.79% - 2.47%)
Value of Equity = Book Value per share + Terminal Value of Excess Returns
$30.77 = $26.04 + $4.73Inputs used in model:
Stable EPS = Stable Book Value * Return on Equity
$2.90 = $26.04 * 11.12%
Source: Weighted future Return on Equity estimates from 18 analysts.
Book Value of Equity per Share: $26.04
Source: Weighted future Book Value estimates from 17 analysts.
Expected Growth Rate: 2.47%
Source: Risk Free Rate/ 10 year Government Bond Rate in USD.
Value per share:
Current discount (share price of $31.87): -3.57%
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 = 9.79% = 2.47% + (0.972 * 7.53%)
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($327,856,328,475).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.972 = 0.494 (1 + (1- 40%) (143.73%))
Levered Beta used in calculation = 0.972
This company is a bank or financial institution, which is analysed accordingly below.
Purchase Bank of America on or before the 'Buy Limit' to receive their next dividend payment.
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.
Average tenure and age of the Bank of America management team in years:
Average tenure and age of the Bank of America board of directors in years:
Examining Bank of America Corporation's (NYSE:BAC) past track record of performance is a valuable exercise for investors. … View our latest analysis for Bank of America How Did BAC's Recent Performance Stack Up Against Its Past? … Given that these figures may be fairly short-term, I have determined an annualized five-year value for BAC's net income, which stands at US$7.78B This means on average, Bank of America has been able to steadily improve its bottom line over the past few years as well.Simply Wall St - – Full article
Looking at data points such as book values, in addition to the return and cost of equity, can be appropriate for assessing BAC’s value. … The returns in excess of cost of equity is called excess returns: Excess Return Per Share = (Stable Return On Equity – Cost Of Equity) (Book Value Of Equity Per Share) = (11.12% – 9.78%) * $26.03 = $0.35 We use this value to calculate the terminal value of the company, which is how much we expect the company to continue to earn every year, forever. … This is a common component of discounted cash flow models: Terminal Value Per Share = Excess Return Per Share / (Cost of Equity – Expected Growth Rate) = $0.35 / (9.78% – 2.47%) = $4.77 Putting this all together, we get the value of BAC’s share: Value Per Share = Book Value of Equity Per Share + Terminal Value Per Share = $26.03 + $4.77 = $30.8 Relative to the present share price of $31.95, BAC is , at this time, priced in-line with its intrinsic value.Simply Wall St - – Full article
Bank of America Corporation (NYSE:BAC) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of $31.92 is based on unrealistic expectations. … As the legendary value investor Ben Graham once said, “Price is what you pay, value is what you get.” Bank of America is trading at price-to-earnings (PE) ratio of 19.58x, which tells us the stock is overvalued based on current earnings compared to the banks industry average of 17.01x , and undervalued relative to the current US market average of 20.14x. … Based on this growth, Bank of America's stock can be considered slightly overvalued , based on fundamental analysis.Simply Wall St - – Full article
Formula Price-Earnings Ratio = Price per share ÷ Earnings per share P/E Calculation for BAC Price per share = $30.66 Earnings per share = $1.848 ∴ Price-Earnings Ratio = $30.66 ÷ $1.848 = 16.6x The P/E ratio isn’t a metric you view in isolation and only becomes useful when you compare it against other similar companies. … BAC’s P/E of 16.6x is lower than its industry peers (16.8x), which implies that each dollar of BAC’s earnings is being undervalued by investors. … For example, if you inadvertently compared lower risk firms with BAC, then investors would naturally value BAC at a lower price since it is a riskier investment.Simply Wall St - – Full article
Though banks are required to have a certain level of buffer to meet its capital requirements, Bank of America’s leverage level of 8x is significantly below the appropriate ceiling of 20x. … Compared to the appropriate industry loan to deposit level of 90%, Bank of America’s ratio of over 71.35% is sensibly lower and within the safe margin, which positions the bank cautiously in terms of liquidity as it has not disproportionately lent out its deposits and has retained an apt level of deposits.Conclusion Bank of America meets all of our liquidity and leverage criteria, exhibiting operational prudency. … The bank’s favourable liquidity and leverage position exposes it to less risk when it comes to repaying financial obligations, in particular, in the case of an adverse macro event.Simply Wall St - – Full article
This means that the opportunity to buy Bank of America at a good price has disappeared! … Bank of America’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. … If you believe Bank of America should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable.Simply Wall St - – Full article
View our latest analysis for Bank of America 5 questions to ask before buying a dividend stock When researching a dividend stock, I always follow the following screening criteria: Does it pay an annual yield higher than 75% of dividend payers? … If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. … Not only have dividend payouts from Bank of America fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years.Simply Wall St - – Full article
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.
|Name:||Bank of America Corporation|
Bank of America Corporation
Bank of America Corporate Center,
100 North Tryon Street,
North Carolina, 28255,
|Exchange Symbol||Ticker Symbol||Security||Exchange||Country||Currency||Listed on|
|NYSE||BAC||Common Stock||New York Stock Exchange||US||USD||02. Jan 1969|
|DB||NCB||Common Stock||Deutsche Boerse AG||DE||EUR||02. Jan 1969|
|XTRA||NCB||Common Stock||XETRA Trading Platform||DE||EUR||02. Jan 1969|
|LSE||0Q16||Common Stock||London Stock Exchange||GB||CHF||02. Jan 1969|
|SWX||BAC||Common Stock||SIX Swiss Exchange||CH||CHF||02. Jan 1969|
|SNSE||BAC||Common Stock||Santiago Stock Exchange||CL||USD||02. Jan 1969|
|BVC||BAC||Common Stock||Bolsa de Valores de Colombia||CO||COP||02. Jan 1969|
|KAS||US_BAC_||Common Stock||Kazakhstan Stock Exchange||KZ||KZT||02. Jan 1969|
|BMV||BAC *||Common Stock||Bolsa Mexicana de Valores||MX||MXN||02. Jan 1969|
|BVL||BAC||Common Stock||Bolsa de Valores de Lima||PE||USD||02. Jan 1969|
|NYSE||BAC.PRW||DEPSHS PFD SER W||New York Stock Exchange||US||USD||05. Sep 2014|
|NYSE||BML.PRG||PFD1/1200 SR1||New York Stock Exchange||US||USD||27. Oct 2004|
|NYSE||BML.PRH||PFD 1/1200SER2||New York Stock Exchange||US||USD||08. Mar 2005|
|NYSE||BML.PRI||PFD 1/1200SER3||New York Stock Exchange||US||USD||14. Nov 2005|
|NYSE||BML.PRL||PFD 1/1200SER5||New York Stock Exchange||US||USD||26. Mar 2007|
|NYSE||BAC.PRE||PFD PER1/1000E||New York Stock Exchange||US||USD||31. Oct 2006|
|NYSE||BAC.PRY||DEP 1/1000 PFD||New York Stock Exchange||US||USD||23. Jan 2015|
|NYSE||BAC.PRC||PFD CUM SER C||New York Stock Exchange||US||USD||25. Jan 2016|
|NYSE||BAC PRJCL||DP1/1000 7.25% J||New York Stock Exchange||US||USD||16. Nov 2007|
|NYSE||BAC.PRI||DEP SH PFD S I||New York Stock Exchange||US||USD||24. Sep 2007|
|NYSE||BAC.PRA||DEP SHS PFD EE||New York Stock Exchange||US||USD||20. Apr 2016|
|NYSE||BAC.PRD||1/1000 6.204%D||New York Stock Exchange||US||USD||18. Sep 2006|
|NYSE||BAC.PRL||7.25%CNV PFD L||New York Stock Exchange||US||USD||31. Jan 2008|
|OTCPK||NCB2||PERP -U NT 5.2%||Pink Sheets LLC||US||USD||23. May 2013|
|BOVESPA||BOAC34||BDR REPR 1 COM STK||Bolsa de Valores de Sao Paulo||BR||BRL||03. Jan 2012|
|BASE||BA.C||CEDEAR EACH REP 1/2 COM(USD)||Buenos Aires Stock Exchange||AR||ARS||29. Aug 2007|
|DB||A0TUU2||DEP SH REP 1/25TH FIX/FLTG PRF SER 'M'||Deutsche Boerse AG||DE||USD||25. Apr 2008|
|Company Analysis updated:||2018/02/22|
|Last estimates confirmation:||2018/02/21|
|Last earnings update:||2017/12/31|
|Last annual earnings update:||2017/12/31|
All dates in UTC. All financial data provided by Standard & Poor’s Capital IQ.
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.