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
TheStreet Open House

Bank of America Has Gotten Expensive

NEW YORK ( TheStreet) -- The last time I discussed Bank of America (BAC - Get Report), I told you the stock was fairly priced. I didn't see the justification for more gains, even though I was willing to look at the glass-half-full side of the story.

Since then, however, the stock has shot up an additional 12% and breaking that all-important $15 mark last week.

Look, I'm not blaming Bank of America. Other than smiling and saying "thank you," there's not much a company can do when the Street falls in love with its stock. While Bank of America has certainly become a pleasant turnaround story, I can't say that the stock, which closed Wednesday at $14.60, makes sense at this level -- not at a P/E of 31, which is more than three times that of JPMorgan Chase (JPM).

I'm not saying Bank of America's growth is not impressive. In fact, I've said on more than one occasion that the pace of Bank of America's recovery was faster than it had fallen. But I don't believe that investors who are enamored with Bank of America's notable growth truly appreciate the depths the bank had reached. To say it another way, the giant leaps are indeed remarkable. But it's also because Bank of America was so far behind.

What's more, when compared to the likes of Wells Fargo (WFC), the deficits Bank of America still has to work with become more noticeable, including fee income, which was down 4% in the recent quarter due to lower trading. Granted, Bank of America's 6% growth in operating revenue was 5% better than Wells Fargo's, but the bank also posted a 1% sequential decline in net interest income.

I won't disagree that there are still plenty of legacy issues impacting upon Bank of America's performance. But the same explanation can't be used to justify the premium the stock price commands, not when net interest margin (NIM) and earnings assets are underperforming. What's more, it also looks as if JPMorgan is outperforming Bank of America in mortgage originations.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
BAC $15.42 0.00%
AAPL $124.24 0.00%
FB $83.01 0.00%
GOOG $555.17 0.00%
TSLA $190.41 0.00%


DOW 17,678.23 -40.31 -0.23%
S&P 500 2,056.15 -4.90 -0.24%
NASDAQ 4,863.3620 -13.1570 -0.27%

Partners Compare Online Brokers

Free Reports

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