Amidst the selloff in the stock market, investors are increasingly focused on identifying high-quality stocks that are trading below fair value. Different analysts may use different quantitative methods to find the fair value of a stock.
For instance, Morningstararrives at a company’s fair value by determining “how much we would pay today for all the streams of excess cash generated by the company in the future.”
Their analysts use a “detailed discounted cash-flow model”that factors in projections for a firm’s income statement, balance sheet, and cash-flow statement.
Investors have access to various market screeners to find high-quality stocks that trade below fair value. I used a screener.
With that information, here are seven high-quality stocks that are currently trading behind fair value:
Bank of America (BAC)
52-week range: $32.96 – $50.11
Bank of America (NYSE:BAC) is one of the largestfinancial institutionsin the U.S. By value of deposits, it’s second placebehindJPMorgan Chase(NYSE:JPM).
The leading bank releasedQ1 results on April 18. Revenue increased 1.8% year-over-year (YOY) to $23.2 billion. Diluted earnings per share (EPS) came in at 80 cents, compared to 82 cents a year ago.
Banks are typically sensitive to moves in interest rates. Given its large domestic shares, Bank of America is expected to benefit significantly from rising rates.
Managementrecentlyhighlightedthat a 1% increase by the Federal Reserve would lead to $5.4 billion of net interest income (NII) within the coming year.
BAC stockhas declined around 30%year to date (YTD). It currently generates a 2.32% dividend yield. Shares look moderately valued at 10.3 times forward earnings and 3.2 times sales.
Wall Street’s 12-month median price forecast for BAC stockstands at $47. Similarly, fair value estimates suggest$44.67for Bank of America shares.
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