JPMorgan Chase & Co Valuation – July 2016 $JPM
Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016. By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how JPMorgan Chase & Co (JPM) fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): JPMorgan Chase & Co. is a financial holding company. The Company is engaged in investment banking, financial services. It operates in four segments, as well as a Corporate segment. Its segments are Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking and Asset Management. The Consumer & Community Banking segment serves consumers and businesses through personal service at bank branches and through automatic teller machines, online, mobile and telephone banking. The Corporate & Investment Bank segment, comprising Banking and Markets & Investor Services, offers investment banking, market-making, prime brokerage, and treasury and securities products and services to corporations, investors, financial institutions, and government and municipal entities. The Commercial Banking segment provides financial solutions, including lending, treasury services, investment banking and asset management. The Asset Management segment comprises investment and wealth management.
Downloadable PDF version of this valuation:
ModernGraham Valuation of JPM – July 2016
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass all 6 of the following tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $235,459,266,895 | Pass | |
| 2. Earnings Stability | Positive EPS for 10 years prior | Pass | ||
| 3. Dividend Record | Dividend Payments for 10 years prior | Pass | ||
| 4. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | 108.99% | Pass | |
| 5. Moderate PEmg Ratio | PEmg < 20 | 11.86 | Pass | |
| 6. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 0.93 | Pass | |
| Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor. | ||||
| 1. Earnings Stability | Positive EPS for 5 years prior | Pass | ||
| 2. Dividend Record | Currently Pays Dividend | Pass | ||
| 3. Earnings Growth | EPSmg greater than 5 years ago | Pass | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | $5.40 |
| MG Growth Estimate | 4.70% |
| MG Value | $96.69 |
| Opinion | Undervalued |
| MG Grade | B+ |
| MG Value based on 3% Growth | $78.32 |
| MG Value based on 0% Growth | $45.91 |
| Market Implied Growth Rate | 1.68% |
| Current Price | $64.04 |
| % of Intrinsic Value | 66.24% |
JPMorgan Chase & Co. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.11 in 2012 to an estimated $5.4 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.68% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.
JPMorgan Chase & Co. performs fairly well in the ModernGraham grading system, scoring a B+.
Stage 3: Information for Further Research
| Graham Number | $87.12 |
| PEmg | 11.86 |
| PB Ratio | 0.93 |
| Dividend Yield | 2.81% |
| TTM Dividend | $1.80 |
| Number of Consecutive Years of Dividend Growth | 6 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 6/1/2016 |
| Long-Term Debt | $315,572,000,000 |
| Total Assets | $2,466,096,000,000 |
| Intangible Assets | $53,292,000,000 |
| Total Liabilities | $2,213,673,000,000 |
| Shares Outstanding (Diluted Average) | 3,666,500,000 |
Earnings Per Share History
| Next Fiscal Year Estimate | $5.45 |
| Dec2015 | $6.00 |
| Dec2014 | $5.29 |
| Dec2013 | $4.35 |
| Dec2012 | $5.20 |
| Dec2011 | $4.48 |
| Dec2010 | $3.96 |
| Dec2009 | $2.26 |
| Dec2008 | $1.37 |
| Dec2007 | $4.38 |
| Dec2006 | $4.04 |
| Dec2005 | $2.38 |
| Dec2004 | $1.55 |
| Dec2003 | $3.24 |
| Dec2002 | $0.80 |
| Dec2001 | $0.80 |
| Dec2000 | $2.86 |
| Dec1999 | $4.18 |
| Dec1998 | $2.83 |
| Dec1997 | $2.68 |
| Dec1996 | $1.65 |
Earnings Per Share – ModernGraham History
| Next Fiscal Year Estimate | $5.40 |
| Dec2015 | $5.27 |
| Dec2014 | $4.82 |
| Dec2013 | $4.41 |
| Dec2012 | $4.11 |
| Dec2011 | $3.48 |
| Dec2010 | $3.05 |
| Dec2009 | $2.69 |
| Dec2008 | $2.85 |
| Dec2007 | $3.44 |
| Dec2006 | $2.78 |
| Dec2005 | $2.01 |
| Dec2004 | $1.84 |
| Dec2003 | $2.11 |
| Dec2002 | $1.80 |
| Dec2001 | $2.42 |
| Dec2000 | $3.10 |
Recommended Reading:
Other ModernGraham posts about the company
Other ModernGraham posts about related companies
Disclaimer:
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.
