Small-Cap Stocks Valuations Below Long-Term Averages
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 day ago
0mins
Should l Buy BAC?
Source: NASDAQ.COM
- Small-Cap Underperformance: Over the past three years, small-cap stocks have not performed poorly, but they have significantly lagged behind large caps, with the S&P 600 Small Cap Index gaining 55% since late 2022 compared to a 98% advance for large caps, indicating a relative disadvantage in the market.
- Valuation Discrepancy: The current S&P 500 has a trailing P/E ratio of 22.5, while small caps are valued at a forward P/E of only 16, below the pre-pandemic average of 18+, suggesting that small caps may present an increasingly attractive investment opportunity.
- Earnings Growth Outlook: While FactSet projects a 22% earnings growth for the S&P 500 in 2026, Bank of America's forecast of 17% growth for small caps is also noteworthy, indicating potential for small caps to regain investor interest in the near future.
- Market Environment Shift: For small caps to rebound, external conditions must change, particularly with increased challenges in international business, while large caps benefit from overseas revenue, highlighting a structural difference that could impact small-cap performance.
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Analyst Views on BAC
Wall Street analysts forecast BAC stock price to rise
19 Analyst Rating
15 Buy
4 Hold
0 Sell
Strong Buy
Current: 50.550
Low
55.00
Averages
61.64
High
71.00
Current: 50.550
Low
55.00
Averages
61.64
High
71.00
About BAC
Bank of America Corporation is a bank holding company and a financial holding company. Its segments include Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking and Global Markets. Consumer Banking segment offers a range of credit, banking and investment products and services to consumers and small businesses. The GWIM includes two businesses: Merrill Wealth Management, which provides tailored solutions to meet clients' needs through a full set of investment management, brokerage, banking and retirement products and Bank of America Private Bank, which provides comprehensive wealth management solutions. Global Banking segment provides a range of lending-related products and services, integrated working capital management and treasury solutions, and underwriting and advisory services. Global Markets segment offers sales and trading services and research services to institutional clients across fixed-income, credit, currency, commodity, and equity businesses.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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