BAC-PB
Bank of America Corporation
$24.91
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 50.5% below fair value
You pay
$24.91
Bear
$35.22
Fair
$50.32
Bull
$65.41
Bear
$35.22
+41.4%
ROTCE 9.8% → 0.85x TBV
Fair
$50.32
+102.0%
ROTCE 13.0% → 1.33x TBV
Bull
$65.41
+162.6%
ROTCE 15.0% → 1.62x TBV
Key Value Driver
ROTCE (13.0%) vs. cost of equity (10.8%)
Implied Market Multiple
1.49x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $40.00 from 39 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $50.32 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Wall Street's average price target is $40.00 (from 39 analysts). Our estimate is 37% above the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly