JPMorgan Chase & Co Valuation – February 2018 $JPM

Company Profile (obtained from Marketwatch): JPMorgan Chase & Co. is a financial holding company, which provides financial and investment banking services. It offers a range of investment banking products and services in all capital markets, including advising on corporate strategy and structure; capital raising in equity and debt markets; sophisticated risk management; market making in cash securities and derivative instruments; and prime brokerage and research. It also offers investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management and private equity. The company operates its business through the following segments: Consumer and Community Banking; Corporate and Investment Bank; Commercial Banking; and Asset & Wealth Management. The Consumer and Community Banking segment serves consumers and businesses through personal service at bank branches and through automated teller machine, online, mobile, and telephone banking. It is organized into Consumer and Business Banking, Mortgage Banking and Card, Merchant Services and Auto Card. The segment’s Consumer and Business banking offers deposit and investment products and services to consumers, and lending, deposit, and cash management and payment solutions to small businesses; Mortgage Banking includes mortgage origination and servicing activities, as well as portfolios comprised of residential mortgages and home equity loans, including the purchased credit impaired portfolio acquired in the Washington Mutual transaction; and Auto Card issues credit cards to consumers and small businesses, provides payment services to corporate and public sector clients through its commercial card products, offers payment processing services to merchants, and provides auto and student loan services. The Corporate and Investment Bank segment offers a suite of investment banking, market-making, prime brokerage, and treasury and securities products and services to a global client base of corporations, investors, financial institutions, government and municipal entities. It offers a range of investment banking products and services in all capital markets, including advising on corporate strategy and structure, capital-raising in equity and debt markets, as well as loan origination and syndication. The Commercial Banking segment delivers industry knowledge, local expertise and dedicated service to United States and its multinational clients, including corporations, municipalities, financial institutions, and non profit entities. This segment provides financing to real estate investors and owners as well as financial solutions, including lending, treasury services, investment banking, and asset management to meet its client’s domestic and international financial needs. The Asset & Wealth Management segment provides asset and wealth management services. It offers investment management across all major asset services, including equities, fixed income, alternatives, and money market funds. JPMorgan Chase was founded in 1968 and is headquartered in New York, NY.

JPM Chart

JPM data by YCharts


Downloadable PDF version of this valuation:

ModernGraham Valuation of JPM – February 2018

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 $407,033,491,576 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 88.97% Pass
5. Moderate PEmg Ratio PEmg < 20 17.65 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.61 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 $6.65
MG Growth Estimate 5.68%
MG Value $131.95
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $96.38
MG Value based on 0% Growth $56.50
Market Implied Growth Rate 4.57%
Current Price $117.31
% of Intrinsic Value 88.90%

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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.82 in 2014 to an estimated $6.65 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.57% 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 within a margin of safety relative to the price.

At the time of valuation, further research into JPMorgan Chase & Co. revealed the company was trading above its Graham Number of $107.91. The company pays a dividend of $2.12 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 17.65, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

JPMorgan Chase & Co. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $107.91
PEmg 17.65
PB Ratio 1.61
Dividend Yield 1.81%
TTM Dividend $2.12
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $284,080,000,000
Total Assets $2,533,600,000,000
Intangible Assets $54,392,000,000
Total Liabilities $2,277,907,000,000
Shares Outstanding (Diluted Average) 3,512,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.72
Dec2017 $6.31
Dec2016 $6.19
Dec2015 $6.00
Dec2014 $5.29
Dec2013 $4.34
Dec2012 $5.20
Dec2011 $4.48
Dec2010 $3.96
Dec2009 $2.26
Dec2008 $1.35
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 $3.69
Dec1998 $2.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.65
Dec2017 $5.95
Dec2016 $5.65
Dec2015 $5.27
Dec2014 $4.82
Dec2013 $4.41
Dec2012 $4.11
Dec2011 $3.47
Dec2010 $3.05
Dec2009 $2.69
Dec2008 $2.85
Dec2007 $3.44
Dec2006 $2.78
Dec2005 $2.01
Dec2004 $1.84
Dec2003 $2.08
Dec2002 $1.73

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Defensive Investor – July 2016
5 Undervalued Dow Components to Research – July 2016
10 Low PE Stocks for the Defensive Investor – June 2016
10 Low PE Stocks for the Defensive Investor – May 2016
18 Best Stocks For Value Investors This Week – 1/30/16

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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.

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