The latest earnings update Bank of America Corporation’s (NYSE:BAC) released in December 2017 confirmed that the company benefited from a small tailwind, eventuating to a single-digit earnings growth of 2.96%. Investors may find it useful to understand how market analysts view Bank of America’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in. Check out our latest analysis for Bank of America
Market analysts’ consensus outlook for the upcoming year seems optimistic, with earnings climbing by a significant 57.03%. This high growth in earnings is expected to continue, bringing the bottom line up to US$29.29B by 2021.
Even though it’s useful to understand the rate of growth each year relative to today’s value, it may be more beneficial analyzing the rate at which the earnings are rising or falling on average every year. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of Bank of America’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 13.58%. This means, we can presume Bank of America will grow its earnings by 13.58% every year for the next couple of years.
For Bank of America, I’ve compiled three important aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is BAC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BAC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BAC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.