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BDSwiss | October 19, 2017

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Focus on Bank of America - BDSwiss

Focus on Bank of America

The Bank of America stock is among the great winners of the US presidential election. Hardly any other asset has grown over the last few weeks as constantly as the big bank. Slowly, however, investors are wondering how much substance is actually behind this growth.

Is Bank of America overvalued?bank-of-america-bdswiss-small

To answer the question of whether the Bank of America is actually overvalued, one must first ask how bank stocks are valued. The classic method is the price to earning ratio. using this method, the current share price is divided by the company’s profit per share. With this method we are currently at a ratio of about 15.5. This means that investors currently pay %15.5 for every $1 of corporate profits. This corresponds with a return of around 6.5% per year. If we compare this with the S&P 5000, for example, Bank of America still looks good despite the gains by the S&P over the past few weeks. On average for the S&P the P/E ratios is about 24.5% or 4.1% per year.

Not necessarily a short-term trend

There are, of course, many indicators and key figures in relation to the share price. However, this example is intended to illustrate that Bank of America’s current upturn could continue. Even though the stock has grown massively in recent weeks, it is not necessarily a short-term trend. It is still however, a good idea to stay alert and to capitalize on short-term opportunities. Thanks to the dynamic products offered by BDSwiss, you have the ability to invest in both rising and falling prices. The most important thing is to pay attention to the market and not miss out on opportunities to enter the market at adventageous prices.

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