Bank America and the other five largest commercial banks increased lending to businesses in the first quarter of 2014 by over 8%, according to my research. I've been heartened to learn that banks are loosening their lending standards to commercial borrowers to offset the big declines in mortgage lending and refinancing.
Let's look at a one-year chart of Bank of America that not only examines the stock's price but illustrates two key financial statistics that are important to its turnaround.
BAC data by YCharts
The orange quarterly revenue line is headed in a very positive direction. The trailing 12-month (TTM) operating margin turned south in the first quarter of 2014, but I expect it will stabilize as BAC increases both its commercial lines of credit and loan activities.
As of the most recent quarter, Bank of America's stock was trading with a price-to-book ratio of about 0.72 and a price-to-earnings-to growth (PEG) ratio of only 0.83, according to numbers provided by Yahoo! Finance. These numbers suggest shares of BAC are undervalued.
Now is the time to consider accumulating BAC, which I believe will rebound to $20 within a year.
At the time of publication the author had no position in any of the stocks mentioned.
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