Company Profile (obtained from Google Finance): JPMorgan Chase & Co. (JPMorgan Chase) is a financial holding company. The Company is a global financial services firm and a banking institution in the United States, with global operations. The Company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity. One of the Company’s principal operating subsidiaries in the United Kingdom is J.P. Morgan Securities plc., a subsidiary of JPMorgan Chase Bank, N.A. JPMorgan Chase’s activities are organized into four business segments, as well as Corporate/Private Equity. The Company’s consumer business is the Consumer & Community Banking segment. The Company’s wholesale businesses consists of Corporate & Investment Bank, Commercial Banking, and Asset Management segments. Effective January 7, 2014, JPMorgan Chase & Co acquired an undisclosed minority stake in Chi-X Global Holdings LLC.
Defensive Investor – must pass all 6 of the following tests: Score = 6/6
- Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
- Earnings Stability – positive earnings per share for at least 10 straight years – PASS
- Dividend Record – has paid a dividend for at least 10 straight years – PASS
- Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
- Moderate PEmg ratio – PEmg is less than 20 – PASS
- Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS
Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3
- Earnings Stability – positive earnings per share for at least 5 years – PASS
- Dividend Record – currently pays a dividend – PASS
- Earnings growth – EPSmg greater than 5 years ago – PASS
|Value Based on 3% Growth||$63.95|
|Value Based on 0% Growth||$37.49|
|Market Implied Growth Rate||2.28%|
Balance Sheet – 12/31/2013
Earnings Per Share
Earnings Per Share – ModernGraham
JP Morgan Chase is a very strong candidate for both the Defensive Investor and the Enterprising Investor. Despite the financial crisis, the company passes all of the requirements of either investor type. As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods, should feel very comfortable proceeding with further research into the company to determine whether it would fit in their individual portfolios. This research should include a review of some competitor companies, through a review of ModernGraham’s valuation of Wells Fargo (WFC) or other companies listed in ModernGraham Stocks & Screens. From a valuation perspective, the company appears strong after growing its EPSmg (normalized earnings) from $2.51 in 2009 to $4.41 for 2013. This solid level of demonstrated historical growth outpaces the market’s current implied estimate for growth of 2.28%, leading the ModernGraham valuation model to return an intrinsic value estimate that is well above the market price.
The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects. What do you think? What value would you put on JP Morgan Chase (JPM)? Where do you see the company going in the future? Is there a company you like better? Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.
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Disclaimer: The author did not hold a position in JP Morgan Chase (JPM) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.
Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.