JPM Market Research & Analysis Report
Updated Apr 18, 2016

Growth and Balance Sheet

JPMorgan Chase & Co. (JPM) reported earnings per share of $1.35 on revenue of $24.08 billion. Analysts were expecting earnings per share of $1.24 on revenue of $23.80 billion. Earnings, however, are down significantly from the same quarter last year, when JPMorgan reported EPS of $1.61 on revenue of $24.82 billion. The firm missed expectations on investment-banking revenue but beat on trading. Revenues in all of the major divisions were down from the same quarter last year.

Here's the breakdown:

Investment-banking revenue was $1.23 billion ($1.36 billion expected), down 24% year-on-year. That was driven by lower debt and equity underwriting fees, the firm said.

Trading revenue came in at $5.17 billion ($4.58 billion expected), down 11% year-on-year.

Fixed-income trading revenue came in at $3.59 billion ($3.23 billion expected), down 13% year-on-year. That reflects "an increase in the rates business which was more than offset by lower performance across asset classes," the firm said.

Equity trading came in at $1.58 billion ($1.35 billion expected), down 5% year-on-year.

Last quarter, JPMorgan beat on the top and bottom lines, reporting earnings per share of $1.32 ($1.28 expected) on revenue of $23.7 billion ($23.24 billion expected).

The first quarter is typically the strongest for investment banks, but analysts are expecting an unusually weak Q1 earnings season on Wall Street this year.

Choppy trading conditions in early 2016, fears over China's growth, and a collapsed oil price are thought to have created a "perfect storm" for banks. Investment-banking revenue is down 36% across the Street, according to preliminary Q1 data from Dealogic — its lowest level since 2009.  

Valuation

JPMorgan Chase & Co. (JPM) P/E stands at 10.31 below the industry average of 12.43, and below the S&P 500 average of 17.15 The company is currently trading below the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 7.10x to 13.20 trailing 12-month earnings. JPM's current Price/Sales of 2.56 is below the average of its industry of 3.03. The achieved operating margin of the company is above the average operating margin of the selected competitors, and it is above the industry average. The quarterly revenue is above the industry average and above its main competitors. The beta of 1.23 implies higher volatility of the stock with respect to the S&P 500. JPM has shown positive earnings consistency over the last five years. Company’s earnings have increased by 8.65% over the same period. The current quarter earnings in comparison to the same quarter last year are -10.92%. JPM’s Total Debt/Equity of 193.07 is negative. The stock is currently trading below its intrinsic value of $73.48 this suggests that the stock is undervalued at these levels. JPM’s current price levels are below the maximum level, is trading 14.12% below the 52 week high of $70.61, and the technical analysis give a bullish view of the stock. The majority of analyst ratings are bullish. JPM dividend yield stands at 2.80%. 

About JPM

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.

Competitor Comparison

JPMorgan Chase & Co. (NYSE: JPM) N.V.

Highlights

JPMorgan Chase's principal bank subsidiaries are JPMorgan Chase Bank, National Association (JPMorgan Chase Bank, N.A.), a national banking association with branches in 23 states, and Chase Bank USA, National Association (Chase Bank USA, N.A.), a national banking association that is the Company's credit card-issuing bank. JPMorgan Chase's principal nonbank subsidiary is J.P. Morgan Securities LLC (JPMorgan Securities), the Company's United States investment banking firm. The bank and nonbank subsidiaries of JPMorgan Chase operate nationally, as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. The Company's principal operating subsidiary in the United Kingdom is J.P. Morgan Securities plc, a subsidiary of JPMorgan Chase Bank, N.A. The stock closed yesterday’s trading session at $61.87. In the past year, the stock has hit a 52-week low of $50.07 and 52-week high of $70.61. JPM has a market cap of $226.63 billion and is part of the financial sector.

• Strong franchise across business divisions       
• Improved liquidity and capital position  
• Diversified revenue stream

• Overdependence on North America
• Highly competitive market  
• Oil price decline

JPM Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. JPM's 52 week high is $70.61 current price is 61.87, is 14.12% below the 52 week high. 

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 10.31 below the average industry P/E ratio of 12.43 and is below the S&P 500 P/E ratio of 17.15. 

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 0.55% of JPM stock. Management's representation is not large enough. This does satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

JPM is trading in the range of $57.07 - $62.91 in the past 30 days. The stock has been showing support at $59.90 and resistance in the $62.60 range. The stock is trading above the 50-Day Moving Average and above the 200-Day Moving Average. The RSI(14) is 61.66. Our indicators give a bullish view on JPM. 

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 13 Buy, 12 Outperform, 4 Hold, 0 Underperform and 0 Sell.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. JPM’s annual EPS for the last 5 years were 4.48, 5.20, 4.34, 5.29, 6.00 this type of earnings action is positive. 

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 25% or should be less than the average Debt/Equity for its industry. JPM’s have total debt/equity ratio of 193.07 which is negative.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. JPM’s EPS growth for this quarter relative to the same quarter a year earlier is -10.92, below our target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. JPM’s annual earnings growth rate over the past five years is 8.65%, below the target growth rate.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.