BAC Stock Analysis – Should You Buy Now?

Since the Subprime crisis in 2008, I have avoided financial stocks because watching how the largest financial companies were brought to their knees made me a little nervous. However, it’s been a long time and I feel that perhaps I am now better in analysis stocks that perhaps its time to look into some financial stocks again. However, please do not take this as a recommendation to buy. Look at all my analysis as a way to learn instead. So with that out of the way, its time to look at our 1st financial stock and I like Bank of America, BAC. So here’s my BAC Stock Analysis.

As always, my goals with this BAC Stock Analysis is to keep things simple and straightforward with no bias. Remember to leave a comment at the end of this analysis if you find it helpful…

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BAC Stock Analysis – Business Snapshot

BAC Stock Analysis Business Snapshot
BAC Stock Analysis – Business Snapshot

With revenue of $81B, Bank of America has to be one of the largest banks around. BAC provides all sort of financial service from retail to corporate. Like all the rest of the financial sector, BAC went through a rough period during the subprime crisis but if memory serves me right, they were also one of the strongest then unlike Citibank.

BAC Stock Analysis – Earnings Per Share

While I do not know much about a company’s past nor will I start digging because by just looking at the 10 year earnings per share history gives me a good idea of how solid a company is. So let’s take a look into BAC 10 year earnings per share history.

BAC Stock Analysis - 10 year Earnings Per Share History
BAC Stock Analysis – 10 year Earnings Per Share History

From this picture, it’s clear BAC is not growing and that’s probably reflected in their stock price now (by the way, it’s best to look at the stock price at the end). From an EPS of $4.59 to a $1.31 EPS in 2015… declining for sure. Of course, credit should be given to BAC for the recovery from 2009 to a decent 1.31 EPS now. Looking at this 10 year record, we know that valuation is different now. BAC is certainly not a growth stock. Personally, I will not be investing in a company like this. However, for practice, we will complete this analysis.

BAC Stock Analysis – Debt Equity Ratio

BAC Stock Analysis - Debt Equity Ratio
BAC Stock Analysis – Debt Equity Ratio

For a bank, the D/E ratio is at a healthy 0.98. The industry average for financial companies is at about 4.0 D/E ratio. So this is quite good.

BAC Stock Analysis – Return on Equity

BAC Stock Analysis - 10 year Return on Equity Track Record
BAC Stock Analysis – 10 year Return on Equity Track Record

In 2006, it was a decent 18%. Dived to as low as -1.33 before recovering to 6.29. Well, this is a company that is recovering. It may be a financial giant but it’s very much wounded and I suspect sentiment on BAC is not really great in recent years.

BAC Stock Analysis – Operating Cash Flow

BAC Stock Analysis - Operating Cash FlowBAC Stock Analysis – Operating Cash Flow

It’s a good sign to see BAC having a strong operating cash flow. Perhaps the worse is indeed behind them. So should we consider buying BAC stocks?

Should You Buy BAC Stocks?

Personally, I would avoid BAC because I prefer companies with consistent and predictable growth in Earnings Per Share over a 10 year period. BAC failed this important 1st screen for me. But if there are any BAC lovers out there, I will provide my valuation of BAC in this stock analysis. So here it is…

BAC Stock Analysis - Should You Buy BAC Stocks?Should You Buy BAC Stocks?

At the point of this writing, BAC is trading at $14.80 which is way below my valuation of $18.00. Looks like a good buy to me at this price level. Perhaps I might just be tempted to park a small portion of my portfolio into BAC. I probably will. As for you, you have to decide. I

Good luck and please leave a comment below as I love to hear from you.

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