Is Bank of America overvalued?
For all the Bank of America bulls still giddy over the 100 percent plus gain that the bank's stock racked up for 2012, a dose of reality hit hard in the form a mildly bearish report from Credit Suisse this week.
You might have grown accustomed to bullish reports. The report was a timely reminder that there are no sure shots in the industry.
As noted by TheStreet.com, the analyst says the stock's "current valuation appears to be ahead of the company's near- to intermediate-term performance and appears to be discounting significantly faster improvements in efficiency than we would be expecting. At its current valuation, the shares appear to be discounting at least a 16% improvement in costs over the next year vs. our estimate of 10%."
The article notes also that "Bank of America's shares certainly appear expensive to forward earnings when compared to other U.S. banking giants. The shares closed at $11.98 Tuesday, trading for 0.9 times their reported Sept. 30 tangible book value, and for 12.4 times the consensus 2013 earnings estimate of 97 cents, among analysts polled by Thomson Reuters. The consensus 2014 earnings per share (EPS) estimate is $1.27."
The fundamentals leave plenty of reasons to be bullish. But it may not be easy to justify an above-$10 share price. As always, the bank's earnings report next week will be closely parsed.
- here's the article