• If you are wondering whether Bank of America stock still offers value at current levels, this article walks through what the market price may be implying about the company.
• The stock last closed at US$57.91, with returns of 1.9% over the past 7 days, 11.8% over the past 30 days, 3.5% year to date, 26.8% over the past year, 121.1% over 3 years and 60.1% over 5 years. These figures give useful context before looking at valuation.
• Recent headlines around Bank of America have focused on its position as one of the largest US banks, its exposure to interest rate trends and ongoing regulatory scrutiny of the sector. Together, these themes help set expectations for risk and potential reward that can feed directly into how the stock is priced.
• On Simply Wall St's 6 point valuation checklist, Bank of America currently scores a 3 out of 6. The sections that follow will compare different valuation approaches and then finish with a broader way to think about what this score really means for you as an investor.

Approach 1: Bank of America Excess Returns Analysis

The Excess Returns model looks at how effectively Bank of America turns shareholder equity into profits above its estimated cost of equity. Instead of focusing on cash flows, it compares the return generated on the company’s book value with the return that equity investors are assumed to require.

For Bank of America, the starting Book Value is US$38.66 per share, with a Stable Book Value estimate of US$43.35 per share, based on weighted future book value estimates from 12 analysts. The model uses a Stable EPS of US$5.32 per share, sourced from weighted future return on equity estimates from 14 analysts, against a Cost of Equity of US$3.85 per share. That gap translates into an Excess Return of US$1.46 per share, supported by an average Return on Equity of 12.26%.

Feeding these inputs into the Excess Returns framework produces an estimated intrinsic value of US$70.71 per share. Compared with the recent share price of US$57.91, this implies the stock is about 18.1% undervalued on this approach.

Result: UNDERVALUED

Our Excess Returns analysis suggests Bank of America is undervalued by 18.1%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.

Approach 2: Bank of America Price vs Earnings

For a profitable company like Bank of America, the P/E ratio is a useful yardstick because it connects the price you pay directly to the earnings the company produces. It helps you gauge how much the market is currently willing to pay for each dollar of earnings.

What counts as a “normal” or “fair” P/E ratio often reflects the balance between expected earnings growth and risk. Higher expected growth or lower perceived risk can justify a higher multiple, while slower growth or greater uncertainty tend to pull it down.

Bank of America currently trades on a P/E of 13.58x. This sits above the Banks industry average of 12.03x, but below the peer group average of 14.71x. Simply Wall St introduces a “Fair Ratio” of 14.70x, which is the P/E level estimated for Bank of America after factoring in the company’s earnings profile, industry, profit margins, market cap and specific risks.

This Fair Ratio aims to be more tailored than a simple comparison with industry or peers because it adjusts for growth, risk and profitability rather than assuming all banks deserve the same multiple. Against this Fair Ratio, Bank of America’s current P/E of 13.58x is lower, which indicates the stock is trading at a discount on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Bank of America Narrative

Earlier it was mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives for Bank of America. These are short, clear stories that tie your view of the company to a financial forecast and an estimated fair value. You can then compare that fair value with the current price to help you decide whether the stock looks attractive or expensive. Each Narrative lives on the Community page, updates automatically when new earnings or news arrive, and reflects different perspectives, such as a more optimistic view that Bank of America could be worth around US$71.00 if revenue, earnings and margins line up with higher analyst expectations, or a more cautious view that anchors closer to US$57.50 if you lean toward lower forecasts and a tighter margin of safety.

Do you think there's more to the story for Bank of America? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.