Comparing Bank Of America's P/E Ratios To JPMorgan Chase And Wells Fargo

Chris B Murphy profile picture
Chris B Murphy
3.66K Followers

Summary

  • Bank of America's P/E ratio has fallen back to earth to 14.5 versus 17 just before the Fed hike in March and has fallen 12% YTD.
  • Forward P/Es for JPMorgan Chase, Wells Fargo, and Bank of America have recently converged to 12 as economic growth expectations have waned.
  • With the correction of its P/E, Bank of America is more inline with its peers but still trades at a slight premium.
  • As a result, any drop in Treasury yields might put pressure on BofA's stock. However, any dips will likely pose attractive entry points for long-term investors.

If you've been following bank stocks lately, you've seen their stock prices trend lower along with Treasury yields as hopes of Trump's agenda passing this year fades. Whether we agree with the market's assessment of future conditions or not, we have to expect pullbacks and possibly corrections to the Trump bank rally.

As a result, focusing on the fundamentals such as economic growth, loan growth, and the Fed are just a few of the factors that will be imperative for investors to consider before going long financials.

In this analysis, we'll analyze Bank of America (NYSE:BAC) as it relates to JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Co. (NYSE:WFC).

This is an update to my prior article in March of these three banks before the Q1 earnings releases.

In this analysis, we'll be focusing on comparing P/E and Forward P/E ratios for our three banks.

In full disclosure, this article is not a comprehensive analysis of Bank of America or bank stocks. I am not a financial advisor, and we will only be analyzing a few of the many fundamental and economic factors that go into driving the stock price and profitability of BAC. Before making any investment decision, please contact your financial advisor. And of course, any analysis of past performance does not guarantee future results.

P/E Ratio Analysis: (price versus historical earnings)

Below is the P/E ratio growth percentages over the past year with BofA surging the most out of our three banks. However, P/Es have corrected substantially from their highs with BofA taking the brunt of the P/E correction.

BAC PE Ratio (<a href=

The large correction in P/E for BofA makes sense given it had the largest price move over the same period or 54%.

BAC Chart

BAC data by YCharts

YTD P/E ratios have fallen back to Earth as Treasury

This article was written by

Chris B Murphy profile picture
3.66K Followers
Hello. I'm a financial writer/blogger & market risk analyst with 15 years in the financial services industry including over 10 years on trading desks of two major banks. --------------------------------------------------------------------------------------------------------------------- My Top-Down meets Bottom-Up Approach to financial analysis includes: ----------------------------------------------------------------------------------------- How Macro Trends & Economic Indicators, Bond yields, Capital flows, & The Fed - Drive Sectors & ultimately Individual Stocks. - Financial analysis of Bank stocks, Commodities, Industrials, & Tech. - Former currency risk advisor to Corporates, with Options and risk policy experience.- Published Work includes: Financial analysis (Investopedia); - Retirement Income (RetirementIncomeAnalyst.com) & Wealth Management Firms. - Hold an Economics degree with a concentration in Finance (University of Rhode Island).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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