The stock in JPMorgan Chase & Co. (JPM, Financial) is offering a compelling entry point at $104.10 per share on the New York Stock Exchange.
The current share price is near the midst of the 52-week range of $88.08 to $119.33 per share. So, there is still room for a 15% stock appreciation. GuruFocus' chart also shows that the current share price is below the 200, 100 and 50-SMA lines.
What's more, macroeconomics should bolster the bank's financial strength, profitability and growth, as interest rate hikes take hold.
With a price-book ratio of 1.53 times, JPMorgan Chase is slightly above its peers with a median at 1.24 times.
With reference to its price-earnings ratio, the bank is better positioned than most of its peers. It has a ratio of 14.79 times while the industry has a median value of 15.27 times. The price-sales ratio of 3.57 times is in line with its peers.
JPMorgan Chase is a loyal dividend payer with a cash quarterly dividend of 56 cents per ordinary share, which leads to a forward annual dividend of $2.24 per share. The forward yield of 2.15% is slightly below the industry median of 2.51% but higher than the S&P 500 dividend yield of 1.81%.
The next 1 1/2 years will be full of surprises for bank shareholders. The company has already anticipated an increase in the quarterly dividend to 80 cents per ordinary share and the allocation of gross funds for up to $20.7 billion in share repurchases.
Assuming an annual dividend of $3.20, the stock is offering a yield of 3.1%, according to current market valuations.
To implement the buyback program, JPMorgan Chase will use cash available on hand. The U.S. bank has cash available on hand of $1.07 trillion or $315.71 per ordinary share, as of the most recent quarter.
Analysts predict a 17% stock appreciation within the next 52 weeks of trading to a price target of $121.29. Consensus is for a 'Buy' approach on JPMorgan with a recommendation rating of 2.3 out of 5.
GuruFocus indicates that the forward price-earnings ratio is 11.6 times. When the ratio is multiplied by an earnings per share of $9.61, it yields a value of $111.48 per share. When the forward price-earnings ratio is multiplied by the earnings per share of $9.80 for full fiscal 2019, the product is a value of $113.7 per share. That is a 9.2% growth from the current market valuation.
JPMorgan also has a strong growth perspective. Wall Street anticipates an 8.5% growth in net earnings to $9.80 per share in full fiscal 2019 and 9.1% annual average growth in the bottom line of the U.S. bank for the following five-year period. Estimates on growth rates are influenced by predictions of further hikes in Federal Reserve rates.
On Friday, JPMorgan Chase will post financial figures for the second-quarter of fiscal 2018. Net earnings are predicted at $2.22 per share, a 22% increase year-over-year on a quarterly revenue of $27.36 billion, a 6.2% growth from the prior-year quarter.
The company will also update shareholders with fresh figures of balance sheet.
As of the most recent quarter the balance sheet of JP Morgan indicated that 35.4% of total assets were covered by loans. It means that at JP Morgan activities of trading and assets management have a decisive impact on the generation of cash flow that the U.S. bank returns to its shareholders in the form of dividend.
In addition, the company has total assets and liabilities valued $2.61 trillion and $2.35 billion. Long-term investments cover 19.2% of total assets.
The balance sheet of JP Morgan is more leveraged than the industry:. Its debt-to-equity ratio is 118% towards an industry median of 63%.
GuruFocus offers the bank a financial strength indicator of 4 out of a total of 10, which signals that the U.S. bank is moderately armored to withstand any economic slowdowns and recessions.
(Disclosure: I have no positions in any security mentioned in this article.)
