This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

'Easy Money' Over for Bank of America Stock: KBW

Stocks in this article: BAC C JPM WFC MS GS AIG FNMA

But Bank of America's shares are looking downright pricey by one measure. The shares trade for 10.4 times the consensus 2014 EPS estimate of $1.29, among analysts polled by Thomson Reuters. Here's how that forward price-to-earnings ratio compares to the company's peers among the "big six" U.S. banks:

  • Shares of JPMorgan Chase (JPM) closed at $52.30 Friday, trading for 8.8 times the consensus 2014 EPS estimate of $5.94.
  • Citigroup (C) closed at $51.45, trading for 9.7 times the consensus 2014 EPS estimate of $5.32.
  • Morgan Stanley (MS) closed at $25.19, trading for 9.9 times the consensus 2014 EPS estimate of $2.54.
  • Goldman Sachs (GS) closed at $158.18, trading for 10.4 times the consensus 2014 EPS estimate of $15.27.
  • Wells Fargo (WFC) closed at $39.88, trading for 10.5 times the consensus 2014 EPS estimate of $3.81.

It's understandable for Wells Fargo's shares to trade at a higher forward P/E than Bank of America, considering that Wells Fargo has had the outstanding earnings track record among the big six over the several years. Then again JPMorgan Chase's shares trade at a much lower multiple, while the company has also greatly outperformed Bank of America, which has had marginal annual earnings results over the past five years.

Looking forward, investors are expecting Bank of America to achieve very significant cost savings as mortgage loan quality continues to improve, repossessed property inventory declines and loan servicing staffs are trimmed. Investors expect additional efficiencies through the company's "Project New BAC" cost-cutting program.

Mutascio estimates that Bank of America can eventually hit $1.80 a share in "normalized" annual earnings, however, he sees the market currently "applying no material discount to the P/E multiple applied to the normalized EPS earnings, regardless of the time that it takes to achieve."

"We are unwilling to use BAC's potential normalized earnings power for a basis of valuation without at least discounting the P/E multiple applied to those earnings for the years we think it will take to get there and the uncertainty of the company's ability to achieve them," Mutascio wrote. "Using this method, we could potentially see a fair value of $14.50 (applying a discounted multiple of 8.0x for timing to normalization and uncertainty of achievability to $1.80), which still would not represent enough upside to warrant an Outperform rating."

BAC Chart BAC data by YCharts

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs