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JPMorgan Chase & Co. (JPM) - Stock Analysis
Posted by: David Kerr (IP Logged)
Date: August 29, 2013 09:40AM
JPMorgan Chase & Co. (JPM) is a global financial services firm that offers banking institutions in the U.S., with global operations. The company provides various financial services worldwide. JPMorgan Chase & Co. operates under four different segments. The Consumer and Community Banking segment is responsible for consumer business needs such as deposits, lending, mortgages, cash management and investments. The Corporate and Investment Bank segment offers various investment banking products and services such as advising and transaction services. The Commercial Banking segment provides lending, investment banking, and asset management services to corporations and other financial institutions. The final segment, the Asset Management segment, is responsible for investment and wealth management services. The Corporate and Investment Bank, Commercial Banking, and Asset Management segments comprise the company’s wholesale businesses.
JPMorgan Chase & Co. has recently been getting a plethora of negative news. For instance, the company is currently dealing with litigation regarding allegations that Bear Sterns and Washington Mutual, before they were acquired by JPM, missold securities to the government-backed mortgage companies The securities in question were sold to Frannie Mae and Freddie Mac. JPM may have to pay over $6 billion to settle the allegations, but it is expected that they will settle for less.
Standard & Poor’s has chosen to maintain their “buy” recommendation throughout the news. The company currently has a total shareholder equity of over $209 billion with a trailing 12-month net income of over $24 billion. Both JPM’s net income and total equity have been on the rise over the past three years, as shown by the chart below.
It is estimated that about 50% of U.S. households have a relationship with JPMorgan Chase & Co. The company is the top rated bank among the largest national banks in terms of customer satisfaction, is the number one global issuer of Visa cards, and was globally the top fee earner in 2012 for investment banking.
JPM’s current P/E Ratio of 8.45 is lower than 80% of other companies in the industry, and the company’s operating margin of 33.61% indicates that it is able to control its costs and expenses more efficiently than 83% of its peers. JPM also offers a 3% dividend yield, which is greater than 74% of similar companies in the industry.
JPM’s earnings have gone from $1.01 per share in the third quarter of 2010 to $1.60 per share in the second quarter of 2013. The company has produced a positive earnings surprise 11 out of the 12 mentioned quarters. These 11 quarters represent an average surprise of 16.58% per quarter. According to 15 analysts covering JPM, the estimated earnings for the third quarter in 2014 is $1.52 per share.
Thomson Reuters currently has the stock rated as “Positive,” with a mean 12-month target price of $62.60 according to 27 analysts on Aug. 28, 2013. Standard & Poor’s rates JPM at four stars with a 12-month target price of $60.00 even as of Aug. 24, 2013. MarketEdge suggests to “Avoid” the stock as of Aug. 23, 2013, while SmartConsensus recommends a “Buy” as of Aug. 28, 2013.
What I Like to Look For
Market Cap: $190.4 Billion
P/E Ratio: 8.46
Forward P/E Ratio: 8.28
P/B Ratio: 0.96
Debt/Equity Ratio: 3.50
PEG Ratio: 1.41
Dividend Yield: 3.00%
Free Cash Flow: Average growth of -19.4% over the last 12 months.
Revenue: Average growth of 7.1% over the last 10 years, and 5.6% over the last 12 months.
EBITDA: Average growth of 5.7% over the last 10 years, and 27.6% over the last 12 months.
Earnings: Average growth of 11.7% over the last five years.
Peter Lynch Chart shows the stock is currently undervalued.
Disclosure: No current position held at the time of writing.
Disclaimer: The opinions and ideas in this article are for informational and educational purposes only. They are not a recommendation to buy or sell any stock at any given time. As always, it is imperative for each individual investor to do their own due diligence and perform their own research on any and all stocks before making an investment decision.
Stocks Discussed: JPM,