Bank of America Corporation (BAC) is committed to returning value to shareholders, while divesting assets in order to focus on core functions. In conjunction, its primary initiatives are to reduce operating costs, strengthen the balance sheet, and focus on long-term growth investments with minimal risk, while lowering its level of debt.
While Wells Fargo (WFC) is regarded as the safest and most favorable asset in the banking industry, I believe Bank of America offers investors and shareholders the most potential for capital appreciation once it rebounds. Bank of America currently trades between 20 percent and 25 percent of the price of most of its peers in the industry. Bank of America is also an investment of limited risk in comparison to competitors like Citigroup (C) or JPMorgan (JPM).
Below, I will discuss why I believe current shareholders should hold Bank of America for the long term, while interested investors should buy in now as Bank of America is trading at attractive price levels.
Bank of America’s beta is around 2.3, while its PEG ratio is slightly over two. Bank of America’s current price is over 13 times earnings. Its sales growth has decreased by over 10 percent from the previous year and by over 9 percent since the previous quarter. Bank of America’s price to book ratio is less than 0.5 and its price to sales ratio is less than one. However, its price to cash flow ratio is over 15. Its current ratio is slightly over one, while its quick ratio is slightly less than one; both have decreased by around 1 percent from Q4 2011 through the end of Q1 2012.To continue reading, click here.