Comparing Bank of America Corp (BAC) to Other Major Banks

Citigroup and Bank of America have a similar forward looking P/E ratios because both companies have seen excellent growth at the bottom line due to cost-cutting measures. Analysts estimate that Citigroup will see 22% growth this year. Another positive for Citigroup is that it has been seeing fewer losses from loans. Those are both really great reasons why I can recommend the stock.

Wells Fargo’s stock is usually the safest bet and many investors are attracted to the firm because it has a reputation for being well managed. This is something that investors are commonly looking for when choosing a stock. The company’s P/E is lower since it is only estimated to see 8% growth this year.

While Wells Fargo might consider reducing costs, its profit margin is still 23%. Due to the decent profit margin, additional cost-cutting measures aren’t really necessary. Especially when you consider that the profit margin is the largest it has been in the last five years. There isn’t really concern there as far as growth is concerned.

Wells Fargo has already been through cost-cutting measures to achieve earnings growth numbers. Companies can’t cut costs indefinitely, and Wells Fargo has pretty much been through all the cost-cutting measures it can take for now. Thus, Wells Fargo’s stock is stable with a 3% dividend, which is very attractive to investors. Analysts are predicting stable growth for Wells Fargo in the future. Thus, I believe that it would be a solid investment.

The bottom line

Despite the missed earnings, I believe that Bank of America has an undervalued stock. Earnings will increase by 24% in five years. It will achieve this growth through cuts in cost, growth in revenue, and by repurchasing shares. Based on this, it looks like the company is on the right track. According to analysts, per-share earnings will increase almost 275% this year.

I think the facts show that the high earnings numbers are justified, so I’m still optimistic. That’s why I recommend Bank of America stock. Depending on what you are looking for, any of the four major banks could be a sound investment.

The article Comparing Bank of America to Other Major Banks originally appeared on Fool.com and is written by Nauman Aly.

Nauman is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.