Search Results for: 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?

Stage 2: Determination of Intrinsic Value

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

Useful Links:

Most Recent Balance Sheet Figures

Earnings Per Share History

Earnings Per Share – ModernGraham History

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.

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 Most Undervalued Companies for the Defensive Investor – November 2015.  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 JP Morgan Chase (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 for consumers and small businesses, commercial banking, financial transaction processing and asset management. JPMorgan Chase’s activities are organized into four business segments. The Company’s Consumer & Community Banking segment serves consumers and businesses through personal service at bank branches and through ATMs, online, mobile and telephone banking. The Corporate & Investment Bank, comprising Banking and Markets & Investor Services, offers investment banking, market-making, prime brokerage, and treasury and securities products and services. The Commercial Banking (CB) segment delivers industry knowledge, local expertise and service to the United States and the United States multinational clients. The Asset Management segment comprises investment and wealth management. The Company also operates a Corporate segment.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of JPM

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Stage 2: Determination of Intrinsic Value

JP Morgan Chase qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The company passes all of the requirements of both investor types, an indication of the strong financial position.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.11 in 2012 to an estimated $5.48 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.83% 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.

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.

Stage 3: Information for Further Research

[/not-level-free]

Useful Links:

Most Recent Balance Sheet Figures

Earnings Per Share History

Earnings Per Share – ModernGraham History

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.

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.

We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.

In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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.  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 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 for consumers and small businesses, commercial banking, financial transaction processing and asset management. JPMorgan Chase’s activities are organized into four business segments. The Company’s Consumer & Community Banking segment serves consumers and businesses through personal service at bank branches and through ATMs, online, mobile and telephone banking. The Corporate & Investment Bank, comprising Banking and Markets & Investor Services, offers investment banking, market-making, prime brokerage, and treasury and securities products and services. The Commercial Banking (CB) segment delivers industry knowledge, local expertise and service to the United States and the United States multinational clients. The Asset Management segment comprises investment and wealth management. The Company also operates a Corporate segment.
[level-free]

To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of JPM – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Stage 2: Determination of Intrinsic Value

JPMorgan Chase & Co. qualifies for both the Defensive Investor and the Enterprising Investor.  The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.47 in 2011 to an estimated $5.15 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.83% 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.

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 JPMorgan Chase & Co. (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.

Stage 3: Information for Further Research

[/level-mg-stocks-screens-subscriber]

Useful Links:

Most Recent Balance Sheet Figures

Earnings Per Share History

Earnings Per Share – ModernGraham History

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 review our detailed disclaimer.

JPMorgan Chase (JPM) currently yields about a 2.7% dividend, and has grown its earnings well over the last few years. Recently, multiple analysts have focused on qualitative factors when reviewing the company. For example, Anthony Ruben of Inflection Point Consulting posited that the company’s moves to have fewer tellers will help the bottom line, while Holmes Osborne of Osborne Global Investors analyzed the CEO’s pay rate compared to competitors. These are great factors to consider in the final stages of an investment decision, but first one must use quantitative metrics to determine the company’s intrinsic value.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

JPM data by YCharts

[level-free]
To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
[/level-free]
[level-mg-stocks-screens-subscriber]

Defensive Investor – Must pass all 6 of the following tests: Score = 6/6

1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
2. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
3. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
4. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
5. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – PASS
6. 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

1. Earnings Stability – Positive earnings per share for at least 5 years – PASS
2. Dividend Record – Currently pays a dividend – PASS
3. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Balance Sheet – March 2015

Earnings Per Share

Earnings Per Share – ModernGraham

Dividend History

JPM Dividend data by YCharts

Conclusion

JPMorgan Chase passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, the company passes every requirement of both investor types, which is a rare accomplishment indicative of the company’s strong financial position. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $3.48 in 2011 to an estimated $5.09 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of 2.24% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 9.25% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that JPMorgan Chase is significantly undervalued at the present time.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]