Is Bank of America (BAC) Still a Buy After a Strong YTD Run?

The question of whether Bank of America (BAC) remains a compelling investment after its robust performance in 2025 hinges on a nuanced analysis of its valuation metrics and growth prospects. With the stock trading at a trailing price-to-earnings (P/E) ratio of 14.99 and a forward P/E of 13.00 as of late 2025, BAC appears to offer a discount relative to its historical averages. Its 10-year average P/E stands at 12.16, while the 3-year average is even lower at 11.67. This suggests that, despite a strong year-to-date (YTD) run, the stock is not yet trading at a premium to its long-term norms.

When compared to industry peers, BAC's valuation appears mixed. The stock's P/E of 14x is slightly below the peer average of 14.4x, indicating relative value. However, it exceeds the broader U.S. banks industry average of 12x, which could signal overvaluation in a sector historically characterized by conservative multiples. This discrepancy underscores the importance of contextualizing BAC's metrics within both peer and industry benchmarks.

A more compelling case for undervaluation emerges from the price-to-earnings-to-growth (PEG) ratio. BAC's PEG of 0.43-calculated by dividing its P/E by its expected earnings growth-suggests the stock is significantly undervalued relative to its growth prospects. A PEG below 1 typically indicates that a stock is trading at a discount to its growth potential, a metric that could attract value-oriented investors. This is further supported by analysts' fair value estimate of $57.23, with the stock currently trading below this threshold.

The price-to-book (P/B) ratio of 1.43 also points to a modest premium over BAC's book value. While this is higher than the industry's historical averages, it remains well below the levels seen during the pre-2008 financial crisis, when U.S. banks traded at P/B ratios exceeding 2.0. This suggests that BAC's valuation is anchored to a more conservative, post-crisis framework, reflecting both regulatory caution and investor skepticism toward traditional banking models.

Turning to enterprise value (EV)/EBITDA, BAC's multiple of 8.75 as of Q4 2025 aligns with broader trends in the financial services sector. While direct industry averages for U.S. banks remain elusive-due in part to the sector's unique capital structure-the median EV/EBITDA for financial services M&A transactions in 2025 was 8.7x. This parity suggests that BAC's valuation is in line with broader market expectations for the sector, despite its larger scale and diversified business model.

The growth potential of BAC is further bolstered by macroeconomic and industry-specific tailwinds. The U.S. banking sector, though historically undervalued, is poised to benefit from a steepening yield curve and improved loan activity in 2025. Additionally, BAC's focus on precision strategies-such as AI-driven efficiency gains and targeted M&A-positions it to navigate the sector's shift toward hyperpersonalization and technological disruption.

However, risks remain. The banking sector faces mounting pressure from fintech competition and regulatory scrutiny, with AI advancements threatening to erode traditional margins. Moreover, the Federal Reserve's potential rate cuts in 2026 could dampen net interest income, a critical revenue driver for banks. These factors necessitate a cautious approach, even as BAC's valuation metrics suggest upside potential.

In conclusion, Bank of America's valuation appears to offer a compelling mix of affordability and growth potential. Its PEG ratio and fair value discount suggest undervaluation, while its EV/EBITDA and P/B ratios align with sector norms. For investors willing to tolerate sector-specific risks, BAC remains a buy-provided they factor in the broader macroeconomic uncertainties and the sector's long-term structural challenges.