Right now, Bank of America Inc. BAC share price is at $46.51, after a 2.43% gain. Moreover, over the past month, the stock fell by 3.04%, but in the past year, increased by 60.46%. Shareholders might be interested in knowing whether the stock is overvalued, even if the company is performing up to par in the current session.

Assuming that all other factors are held constant, this could present itself as an opportunity for shareholders trying to capitalize on the higher share price. The stock is currently below from its 52 week high by 4.49%.

The P/E ratio is used by long-term shareholders to assess the company's market performance against aggregate market data, historical earnings, and the industry at large. A lower P/E can either represent a company's poor future earnings potential or a buying opportunity relative to other stocks. It shows that shareholders are less than willing to pay a high share price, because they do not expect the company to exhibit growth, in terms of future earnings.

Depending on the particular phase of a business cycle, some industries will perform better than others.

Compared to the aggregate P/E ratio of 11.88 in the Banks industry, Bank of America Inc. has a higher P/E ratio of 13.59. Shareholders might be inclined to think that Bank of America Inc. might perform better than its industry group. It's also possible that the stock is overvalued.

There are many limitations to P/E ratio. It is sometimes difficult to determine the nature of the earnings makeup of a company. Shareholders might not get what they're looking for, from trailing earnings.