Bank of America Corp (NYSE:BAC) stock, along with most equities, finds itself caught up in the volatility affecting most stocks. It has risen from the depths of the meltdown in 2008 and now trades near pre-financial crisis highs. The recent volatility has put Bank of America stock into correction territory. However, this correction is also setting up BAC to become a compelling bargain.

Higher Profit for Bank of America Stock?

The Charlotte-based banking giant, like most of its peers, remains caught up in trends affecting the overall economy. Interest rates, which hit rock bottom during the financial crisis, continue the slow creep upward. Moreover, the threat of tariffs has markets on edge. With the increased costs that come with tariffs, activity would theoretically lessen. Despite these threats, earnings forecasts have dramatically improved in recent months.

In a previous article, I described Bank of America stock as the quintessential “hold” stock. I described everything except the dividend as “average,” inspiring investors to neither buy nor sell. Higher earnings forecasts change this view. In 2017, Bank of America stock earned $1.82 per share. Consensus estimates for 2018 earnings stand at $2.47 per share. For 2019, $2.78 per share. In 2020, analysts expect $3.70 per share. At its current price, the stock trades at a 2020 forward price-to-earnings (PE) ratio below eight. Put simply, this stock is becoming cheap.

In a more stable market, I would tell investors to buy BAC. However, the market has seen considerable volatility in recent sessions. This anxiety has taken down the price of Bank of America stock along with most equities.

As a result, BAC stock trades at about 1.2 times book value. Given the volatility, picking up BAC below book value remains a possibility. A 17%+ drop in the stock price would take the stock to that point. If the stock falls below book value, I would treat that occurrence as a buy signal regardless of how the indexes behave.

Bank of America Stock Compares Well to Peers

For the most part, Bank of America stock also compares well to its most direct peers. Due to profit growth, BAC will soon trade at a lower multiple than JPMorgan Chase & Co. (NYSE:JPM). Multiples will remain slightly above Wells Fargo & Co

(NYSE:WFC) which continues to struggle with ongoing scandals. Given the dependence on reputation in the banking industry, buyers should avoid WFC at any valuation.

The one stock BAC might struggle to compete against is Citigroup Inc (NYSE:C). Citigroup’s current PE stands at below 15, compared with 19 for Bank of America stock currently. Also, Citigroup will benefit from the same favorable trends benefiting future profit growth at Bank of America. At current prices, C stock trades at about 7.3 times the expected earnings in 2020. Moreover, Citigroup stock already trades below its book value.

However, both BAC and C almost meet most of the criteria set forth by Warren Buffett’s mentor Benjamin Graham in The Intelligent Investor. I say most because the significance of debt and assets becomes blurred when one’s business is debt. Both pay a dividend and trade at or below a 1.2 price-to-book ratio. Also, they could see PE ratios that fall below nine if the market continues to show volatility. Still, if that occurs, I expect Citigroup will reach that point first.

Bottom Line on Bank of America Stock

A recent correction in both the market and BAC is setting up Bank of America stock to become a compelling purchase. Bank of America stock has generally risen and fallen with the market. It has also shown no immunity to the recent downturn in the market.

The falling price, along with rising profits, may be taking the PE ratio to attractive levels. Moreover, it trades lower than JPM stock has avoided the repeated scandals that affect Wells Fargo. Its peer Citigroup trades at slightly lower multiples. However, BAC could also benefit from the same market and profit trends and, like Citigroup, become an attractive prospect for buyers.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.