Today I will examine Bank of America Corporation’s (NYSE:BAC) latest earnings update (31 March 2018) and compare these figures against its performance over the past couple of years, in addition to how the rest of BAC’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. View our latest analysis for Bank of America
How Did BAC’s Recent Performance Stack Up Against Its Past?
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique allows me to analyze various companies in a uniform manner using the latest information. For Bank of America, its most recent earnings (trailing twelve month) is US$18.27B, which, in comparison to last year’s level, Given that these figures are fairly nearsighted, I’ve calculated an annualized five-year value for Bank of America’s net income, which stands at US$8.64B This means on average, Bank of America has been able to increase its earnings over the past few years.How has it been able to do this? Well, let’s take a look at if it is only because of industry tailwinds, or if Bank of America has experienced some company-specific growth. In the past few years, Bank of America grew its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Scanning growth from a sector-level, the US banks industry has been growing, albeit, at a unexciting single-digit rate of 8.20% over the previous year, and a substantial 10.79% over the last five years. This suggests that any uplift the industry is enjoying, Bank of America has not been able to leverage it as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Bank of America gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Bank of America to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BAC’s future growth? Take a look at our free research report of analyst consensus for BAC’s outlook.
- Financial Health: Is BAC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.