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If you like buying stocks at full price, then you should definitely avoid doing so today. Image credit: iStock/Thinkstock.

I believe that Bank of America (NYSE:BAC) is an incredible bargain right now, particularly after the steep drop in its share price on Wednesday.

It's shares trade for 10.2 times its trailing 12 months' earnings. That's a low valuation for two reasons:

  • First, it's less than half the valuation of stocks on the S&P 500, which trade on average for 21 times earnings.
  • Second, because Bank of America's earnings are growing rapidly.

Last year was the first time since the financial crisis that the $2.1 trillion bank generated respectable profitability in all four calendar quarters. This trend will only improve as it continues to clean up the remainder of legacy issues dating back principally to its 2008 acquisition of mortgage-originator-cum-criminal-enterprise Countrywide Financial.

My focus is the history of banking, and particularly the many cycles that the industry has suffered through over the past 150 years. By my count, there have been upwards of 17 of major panics since the Civil War. The most recent of which was the financial crisis.

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These are scary events. But the banks that make it through them are typically in the clear for many years, if not decades, to grow profits. They're also positioned to take advantage of the fact that many of their peers may not have survived the downturn. In the latest crisis, for instance, more than 500 banks failed.

Bank of America would have been one of them, but for hundreds of billions of dollars' worth of capital and guarantees from the federal government. But the mistakes that led to this are water under the bridge now. What matters today is that Bank of America did survive, and that it can now scale up its profits in an industry with roughly 10% fewer participants.

It's impossible to gauge Bank of America's earnings potential with anything that even remotely resembles precision. What I can tell you, however, is that I would be shocked if it didn't earn 1.2% or more on its assets by some point over the next few years.

While that's a conservative estimate, it's nevertheless almost twice Bank of America's profitability in 2015. Its $15.9 billion in net income last year equates to a return on average assets of 0.74%.

At today's price, in turn, assuming Bank of America will at some point pass the 1% return on average assets threshold, then your basis in shares bought today will eventually equate to a price-to-earnings multiple that's between 6.0 and 7.0.

That is really, really cheap. And particularly so given that Bank of America's CEO Brian Moynihan is committed to giving virtually all of the bank's future earnings back to shareholders via dividends and stock buybacks -- hopefully more of the latter.

I've been wrong before, and I'll be wrong again in the future. But this is a low risk bet that I'd be waging right now if trading restrictions weren't a part of my job (i.e., when I write about Bank of America, as I did on Tuesday and am doing right now, I have to wait three full trading days before I can buy its shares).

Times like these scare people who allow their emotions to dictate their investment decisions. But for the patient and prudent long-term investor, days like today are akin to shopping on Black Friday.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.