Bank Of America Is Still Undervalued

| About: Bank of (BAC)

Bank of America (NYSE:BAC) is the stock with the highest volume at NYSE. In an average day, nearly 300 million of this company's shares change hands. The stock endured a huge plunge in 2011 and a nice recovery so far in 2012. Many investors expect and hope that the stock will continue its recovery throughout the year as they believe the stock is still undervalued. I definitely agree with those investors who think the stock is undervalued.

Price vs Book Value

10 years ago, BAC's book value was $48.11 billion. Today, the company has a book value of $211.70 billion. This indicates a growth of 340%. In the same period, the company's price to book ratio plunged from 2.18 to 0.39.

Click to enlarge

Price vs. Revenues

In the last 10 years, Bank of America's revenue grew from $11.36 billion to a massive $29.60 billion. In 2009, the company's revenue was as high as $45.42 billion. In the last decade, the company's revenue growth rate was 160.68%.

Click to enlarge

Price vs. Cash

Compared to a cash holding of $22.44 billion 10 years ago, BAC currently holds cash of $82.68 billion. The company's cash holdings witnessed a growth of 269% in the last decade.

Click to enlarge

Price vs. EPS

Bank of America currently earns 15 cents per share. A decade ago, the company was earning 69 cents per share. In the last decade, the company's EPS declined by 78.26%. This is the only metric where the company performed similar to its stock price. Once the economy picks up, BAC's earnings will probably increase too.

Click to enlarge

Conclusion: By most metrics, BAC is undervalued. I would advice caution though as the company still has a lot of debt, even though it has been reducing its debt since 2009. I would definitely buy BAC and keep it in my portfolio, but at the same time I would make sure my portfolio is well diversified just in case.

Disclosure: I am long BAC.