bank

Bank Of America Stock Analysis

bank of america's stock saw a huge drop

during 2020 and has recently started to

bounce back

and the question on everyone's mind is

what can we expect over the next 12

months

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really does help so bank of america is

typically one of the stocks that has

mostly appealed to value investors

however with the recent price drops

especially

in the last 12 months a lot of growth

investors are starting to actually have

a look at the stock in question where

they should be jumping on

and gaining with some of the momentum

that it appears

that bank of america has if we go here

and have a look at the trading graph we

can see

the price dropped down pretty steeply

here last year down to about 1960 a

share

and it's currently trading about 39.15 a

share now if we go

do a deep dive into the actual

fundamentals

this is what we see bank of america is

currently trading with a market cap of

330 billion

the share price this time 10 years ago

was sitting at 1347 currently as we said

39.15 current trading price with a p e

ratio

of 16.8 with a very very very healthy

profit margin of 27.12

and then of course positive equity

sitting at 272 billion

with a dividend yield of 1.84

cost of dividend sitting at a 6.18

billion with free cash flow at 37.9

billion

leaving them with a net free cash flow

after that dividend payments over here

of 31.808 billion

so certainly on the face of it a very

very healthy stock

the question is where is bank of america

going

and more specifically is this stock

providing some kind of opportunity for

growth over the next 12 months

one of the first things i like to have a

look at is the number of shares

outstanding

have a look at this if we go here three

years back we look at 9.6

8.8 8.6 and then 8650

so what is looking really good on the

face of it is that bank of america has

been dialing back those number of

outstanding shares

and that is something we always like to

have a look at and that's something we

want to see because it shows a lot of

internal confidence from within the

company

assets have also steadily been heading

in the right direction

liability is a little bit all over the

show but doing pretty well in the last

trailing 12 months

and pretty much the same for total

equity total revenue

gross profit operating income net income

operating cash flow and free cash flow

so certainly on the face of it a lot of

positive things

for the bank of america stock so as we

like to do on this channel we have a 12

point checklist which we hold all stocks

up against

to see whether they are worth holding

and whether you should be buying or

selling the stock so with that in mind

let's jump into the 12 point checklist

and see how bank of america comes out

so firstly if we have a look at the

share price it certainly has

doubled over the last 10 years and so

they get a score

for that the pe ratio is well below 25

their profit margin is much greater than

10 so definitely scoring in those

regards

assets are greater than liabilities and

obviously their dividend cost

is way less than their free cash flow so

all of those positive things as well as

the fact that

the number of shares outstanding has

been going down consistently

for the last three years so in all of

those areas they get a check mark there

now if we go and have a look at total

revenue gross profit

operating income net income cash from

operating activities and then free cash

flow growth

unfortunately it has been inconsistent

over the last three years

in some areas they've moved forward in

some areas they've moved back so we have

to

check these boxes here against them

which gives

them a buy score of 50 and a sell score

of 50

so pretty much slap bang in the middle

in terms of the fundamentals

and obviously this is where we need to

start looking at the off book factors

to take into consideration what the

potential might be for bank of america

in the next 12 months ahead so some of

the off book factors that i think we

need to take into consideration the

first thing is that

obviously bank of america is one of the

usa's

largest banks by assets and branches

and that is really really significant

now there's a lot of talk in the

industry about fintech operations coming

in

there's a lot of talk about new digital

banks but i think we cannot discount the

fact that bank of america has

a massive massive footprint and

especially when you take into

consideration those assets and branches

that they have

those are something which the digital

banks are going to find really hard to

challenge

at least over the next medium term which

is you know

anything between five to ten years the

second thing i want to highlight is that

you know banks obviously stand to

benefit from rising interest rates

which will obviously boost their net

interest margins

now i don't think anybody can argue at

this point that interest rates are

certainly going to go up at some point

in the future

the question on every mind everybody's

mind is when and i don't think anybody

can

accurately answer that but one thing is

absolutely certain if you go

back and you look at historical trends

if you go and have a look at historical

interest rate

cycle trends there's no question about

it that interest rates are going to go

up

and this is going to be very very good

for the banking sector

i think another thing that is worth

noting is that warren buffett sold off

most of his bank stocks in the last year

but he actually added to his bank of

america's stake and i think that's a

very very significant thing to

take into consideration obviously warren

buffett's approach is very different to

a lot of growth investors he's obviously

very primarily focused on value

investing

but i still think that that vote of

confidence is something that we all have

to take into consideration

and then i think the final point that's

really really important to note is that

bank of america trades at around 15.8

times

uh this year's current earning estimates

and that's in line with other large

banks but

still well below the overall market

and in fact if you have a look at their

p e ratio their p e ratio is

pretty much below the industry standard

at the moment so a lot of positive

things there

which leads me to believe on this 50 50

my scales are tipping in the direction

of definitely holding the bank of

america stock

so the industry price projection over

the next 12 months is

42 bucks i personally think that that's

pretty much close to where it could be i

think 43.50 is probably where it's gonna

trade

that is a potential gain of about four

bucks 35 a share which

in real terms provides a margin

potential of 11.11

i think what's important to also note

here when you're looking at this is to

take into consideration that dividend

it is very very very important to factor

this into your calculations and we're

not taking into account

the dividend payments here so this is

purely the potential margin

on the actual share price and so i think

this is a great opportunity to jump in

on bank of america

i think the cycle is going to definitely

indicate upwards in terms of interest

rates

and so there's definitely going to be

additional margins and

additional earnings coming from the bank

of america stock so

personally i think it's a great stock i

think you can't go wrong with it

if you currently hold it i think you

should continue holding if you don't

currently have bank of america in your

portfolio

definitely you should consider anchoring

at least a portion of your portfolio

with strong aristocrats dividend paying

shares and

bank of america is one of those shares

they have got a solid solid history

of paying dividends so i'd be very

interested to know what your thoughts

are around the stock i'd love to know

what your comments are what your price

predictions are over the next 12 months

and if you currently hold chairs if

you're currently looking at buying

shares

um drop me a comment in the comment

section below i love engaging with every

single person on the channel

and obviously i try to respond to every

single person's comment personally so

i'd love to hear from you guys

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