Investors in Bank of America (NYSE:BAC) have been richly rewarded of late. Over the past 12 months, shares of the nation's second largest bank by assets have returned an impressive 79%, compared with the 20% return of the S&P 500. But does this portend a future of slower growth for the megabank? Not necessarily.
To start out with, the consensus price target of the 26 analysts tracked by Standard & Poor's Capital IQ comes in at just over $15 per share, with a high of $20 and a low of $10. Our own analysts here at The Motley Fool put the figure at $18 per share. Thus, assuming the latter figure is in the ballpark, this allows for potential appreciation of 24% from Friday's closing price.
Is this reasonable? I think so.
At present, shares of Bank of America trade for 1.09 times tangible book value. By comparison, shares of Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM) are valued at multiples of 1.9 and 1.4 times tangible book value, respectively. If Bank of America continues to clean of its act, in turn, there's little reason to think that it won't trade within this same range as well.
The catalyst in this regard will be earnings growth. In 2012, and following two straight years of losses, it barely managed to eke out a $3.1 billion profit before taxes. This was a far cry from the $29 billion in pre-tax earnings that Wells Fargo and JPMorgan each reported last year. And it's also a far cry from the $35 billion to $40 billion in pre-tax earnings that CEO Brian Moynihan has predicted the bank will earn once its multiple expense initiatives are out of the way.
The point here is that Bank of America still has a lot of room to run. Has it performed well over the last year? Yes. But going forward, despite all its problems, I continue to be exceptionally bullish on its prospects.