Which Is a Better Investment, Bank of America Corp or Wells Fargo & Co Stock? (2024)

Sifting through countless of stocks in the Banks industry can be tedious, and sometimes two stocks are just too similar to judge which is the better investment. If you’re on the fence about investing in Bank of America Corp or Wells Fargo & Co because you’re not sure how they measure up, it’s important to compare them on a few factors before making your decision.

Read on to learn how Bank of America Corp and Wells Fargo & Co compare based on key financial metrics to determine which better meets your investment needs.

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.

Wells Fargo & Company is a financial services company. It provides a diversified set of banking, investment and mortgage products and services, and consumer and commercial finance, through banking locations and offices, the Internet (www.wellsfargo.com) and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in countries outside the United States. Its segments include Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking, and Wealth and Investment Management. The Wealth and Investment Management segment provides personalized wealth management, brokerage, financial planning, lending, private banking, trust and fiduciary products and services to affluent, high-net worth and ultra-high-net worth clients. Commercial Banking products and services include banking and credit products across multiple industry sectors and municipalities, secured lending and lease products, and treasury management.

As of September 16, 2024, Bank of America Corp had a $299.9 billion market capitalization, compared to the Banks median of $390.9 million. Bank of America Corp’s stock is NA in 2024, NA in the previous five trading days and up 33.9% in the past year.

Currently, Bank of America Corp’s price-earnings ratio is 13.7. Bank of America Corp’s trailing 12-month revenue is $142.4 billion with a 16.0% net profit margin. Year-over-year quarterly sales growth most recently was 13.9%. Analysts expect adjusted earnings to reach $3.264 per share for the current fiscal year. Bank of America Corp currently has a 2.7% dividend yield.

Currently, Wells Fargo & Co’s price-earnings ratio is 11.0. Wells Fargo & Co’s trailing 12-month revenue is $90.7 billion with a 19.4% net profit margin. Year-over-year quarterly sales growth most recently was 9.9%. Analysts expect adjusted earnings to reach $5.073 per share for the current fiscal year. Wells Fargo & Co currently has a 3.0% dividend yield.

Stock evaluation requires access to huge amounts of data and the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movements. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors streamline and work through such data.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A‐F grades for each of five key investing factors: value, growth, momentum, earnings estimate revisions and quality. Here, we’ll take a closer look at Bank of America Corp and Wells Fargo & Co’s stock grades to see how they measure up against one another.

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Successful stock investing involves buying low and selling high, so stock valuation is an important consideration for stock selection.

Buying stocks that are going to go up typically means buying stocks that are undervalued in the first place, although momentum investors may argue that point.

AAII’s A+ Investor Value Grade derives from a stock’s value score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are a good value and so on.

Bank of America Corp has a Value Score of 75, which is Value. Wells Fargo & Co has a Value Score of 83, which is Deep Value.

As you can clearly see from the Value Grade breakdown above, Wells Fargo & Co is considered to have better value than Bank of America Corp. For investors who focus solely on a company’s valuation, Wells Fargo & Co could be a good stock to add to their portfolio. However, it’s important for investors to analyze multiple factors based on a wide range of metrics before deciding whether to buy.

The foundation of growth investing is seeking out stocks of companies exhibiting strong, consistent and prolonged growth that is expected to continue into the future.

In order to compute the growth score and assign it a letter grade, the percentile ranks for each of three components‐consistency of annual sales growth, five-year sales growth rankings adjusted for extreme levels, and consistency of positive annual cash from operations‐must be determined. These three rank figures are added together, and the sum is ranked against the entire stock universe to arrive at a company’s Growth Score to create an equal distribution of grades.

The companies in the bottom 20% of the stock universe receive Growth Grades of F, considered to be very weak, while those in the top 20% receive A grades, which are considered very strong.

Bank of America Corp has a Growth Score of 61, which is Strong. Wells Fargo & Co has a Growth Score of 74, which is Strong.

Looking at the Growth Grade breakdown above, both Bank of America Corp and Wells Fargo & Co have a grade of B. For investors who focus solely on a company’s upward growth, further research should be conducted into both companies’ other financial metrics before deciding whether to invest.

Like the Value Grade, AAII’s A+ Investor Quality Grade comes from the percentile rank of key metrics. Specifically, the Quality Score is the percentile rank of the average of the percentile ranks of return on assets (ROA), return on invested capital (ROIC), gross profit relative to assets, buyback yield, change in total liabilities to assets, accruals, Z double prime bankruptcy risk (Z) score and the F-Score.

The score is variable, meaning it can consider all eight measures or, should any of the eight measures not be valid, the remaining measures that are valid. To be assigned a Quality Score, stocks must have a valid (non-null) measure and corresponding ranking for at least four of the eight quality measures.

The Quality Score is used to assess the underlying “quality” of a particular stock. A higher-quality stock possesses traits associated with upside potential and reduced downside risk. Backtesting of the Quality Grade shows that stocks with higher grades, on average, outperformed stocks with lower grades over the period of 1998 through 2019.

Stocks receive better grades (higher scores) for having higher scores for the quality subcomponents and worse grades (lower scores) for lower scores for the subcomponents.

Bank of America Corp has a Quality Score of 49, which is Average. Wells Fargo & Co has a Quality Score of 73, which is Strong.

Momentum grades help uncover stocks experiencing anomalously high rates of return; research finds that stocks with high relative levels of momentum tend to outperform, whereas those with low levels of momentum tend to continue underperforming.

Earnings estimate revisions scores take into account the magnitude of a company’s earnings surprise in its last two reported fiscal quarters. Often, surprises beget further surprises‐or at least continued sales growth (the exact opposite is generally true, too).

These 2 key factors, when combined with the above, provide a holistic view into a particular stock. Further, by joining A+ Investor you can see whether Bank of America Corp and Wells Fargo & Co pass any of our 60+ stock screens that have outperformed the market since their creation.

Overall, Bank of America Corp stock has a Value Score of 75, Growth Score of 61 and Quality Score of 49.

Wells Fargo & Co stock has a Value Score of 83, Growth Score of 74 and Quality Score of 73.

Comparing Bank of America Corp and Wells Fargo & Co’s grades, scores and metrics can act as a solid basis to determine whether they may be a good investment or not. You’ll also want to look at your portfolio’s asset allocation as well as your risk tolerance and financial goals to see if either of these stocks would make a good fit for you. AAII can help you figure out which investments align with your individual needs and preferences.

Investors are encouraged to do their own due diligence and research. In this way, individuals can effectively become managers of their own assets‐without having to rely on others for financial independence. You can count on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis.

A+ Investor adds to our qualitative teaching with a powerful data suite to help you whittle down investment choices to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.