Is Bank of America Stock a Buy Now?
Key Points
Bank of America should be able to handle whatever path the Federal Reserve chooses with interest rates.
The business holds a solid competitive position, which reduces risk for shareholders.
The current price-to-book ratio is reasonable if you believe Bank of America will post double-digit earnings-per-share growth in the years ahead.
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Bank of America (NYSE: BAC) is one of the biggest banks in the world. It had $3.4 trillion in total assets as of Dec. 31, 2025. Investors are certainly familiar with the company. This spotlight is brighter because Berkshire Hathaway has been such a significant shareholder for a long time.
Does this mean the large financial institution is a buy right now?
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The effect of potentially lower interest rates
Like any other lender, Bank of America is influenced by the changing macro landscape, most notably as it relates to fluctuating interest rates. President Donald Trump recently nominated Kevin Warsh as the next Chair of the Federal Reserve, which could add more support for cutting the Fed Funds interest rate going forward. There are clear implications for this business.
Despite earning lower yields, lower interest rates can benefit Bank of America. When borrowing costs come down, demand for loans from consumers, small businesses, and corporations could rise. Additionally, the rates paid on deposits can be adjusted lower, supporting net interest income.
Bank of America has historically been able to post growth over the long term. Sell-side analysts believe earnings per share (EPS) will increase at a compound annual rate of 13.1% between 2025 and 2028. Any unexpected developments can obviously affect this outlook drastically.
An extremely durable business
Warren Buffett, who stepped down as CEO of Berkshire Hathaway at the end of last year, likes to own companies forever. To do this, he needs to find businesses that have staying power. Bank of America fits the bill. It's a global systemically important bank, which means that it's too big to fail. If there's ever any sign of trouble, there's a chance that the U.S. government will step in to prevent a total failure.
What's more, there will always be a need for the products and services that a financial institution provides. Bank of America also has a wide economic moat, with its scale and customer switching costs, which supports its competitive position. This controls downside risk.
The price-to-book ratio is insightful
When deciding if a stock presents a great buying opportunity right now, it's important that investors do not ignore valuation. This is true of any business, even high-quality ones like Bank of America that have the Oracle of Omaha's stamp of approval.
The price-to-book (P/B) ratio, which measures Bank of America's stock price to its book value per share, is a valuable metric to utilize. It's currently just over 1.2, which is 18% cheaper than it was two months ago in early January. Anything below 1 would be a no-brainer entry point.
However, I still view now as a good time to consider buying shares. The combination of possible multiple expansion and projected double-digit earnings-per-share growth can drive adequate returns over the next five years.
Should you buy stock in Bank of America right now?
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Bank of America is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
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