Discounted Cash Flow Calculation for NSEI:J&KBANK using Excess Returns Model Model
The calculations below outline how an intrinsic value for Jammu and Kashmir Bank is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.
In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.
The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.
The current share price of
Jammu and Kashmir Bank
is above its future cash flow value.
Often investors are willing to pay a
for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
Jammu and Kashmir Bank's
is considered below, and whether this is a fair price.
Price based on past earnings
Jammu and Kashmir Bank's earnings available for a low price, and how does
this compare to other companies in the same industry?
Jammu and Kashmir Bank's earnings are expected to grow significantly at over 20% yearly.
Jammu and Kashmir Bank's revenue is expected to grow significantly at over 20% yearly.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Jammu and Kashmir Bank's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
Jammu and Kashmir Bank
has a total score of
0/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
Fundamentally a bank's business is based upon borrowing and lending money, for
this reason they typically have high levels of debt and we analyse them
This treemap shows a more detailed breakdown of
Jammu and Kashmir Bank's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Parvez Ahmed joined the Jammu & Kashmir Bank Ltd as Company Secretary in 1998. His sheer hardwork and thorough professionalism enabled his swift rise through ranks to become General Manager (President) in 2006. After his elevation in 2011, he served as the Executive President till his assuming office as Chairman and CEO in October 2016.
He is the Founding Member and served as the Chairman of the Srinagar Satellite Chapter of NICR of Institute of Company Secretaries of India for eight consecutive years. He has served as Director on Board of MetLife India Insurance Company Pvt Ltd. He is also serving as Director on Board of JKB Financial Services Ltd.
Insufficient data for Parvez to compare compensation growth.
Parvez's remuneration is lower than average for companies of similar size in India.
Management Team Tenure
Average tenure of the
Jammu and Kashmir Bank
management team in years:
The average tenure for the Jammu and Kashmir Bank management team is less than 2 years, this suggests a new team.
Chairman & CEO
Compliance Officer & Company Secretary
CFO & President
VP & Chief Risk Officer
Board of Directors Tenure
Average tenure and age of the
Jammu and Kashmir Bank
board of directors in years:
The average tenure for the Jammu and Kashmir Bank board of directors is less than 3 years, this suggests a new board.
What Makes The Jammu and Kashmir Bank Limited (NSE:J&KBANK) A Hard Investment?
The Jammu and Kashmir Bank Limited’s (NSE:J&KBANK) profitability and risk are largely affected by the underlying economic growth for the region it operates in IN given it is a small-cap stock with a market capitalisation of ₹21b. … Basel III target banking regulations to improve the sector’s ability to absorb shocks resulting from economic stress which may expose financial institutions like Jammu and Kashmir Bank to vulnerabilities. … High liquidity and low leverage could position Jammu and Kashmir Bank favourably at the face of macro headwinds.
The Jammu and Kashmir Bank Limited provides various banking products and services in India. It operates through Treasury Operations, Corporate/Wholesale Banking, Retail Banking, and Other Banking Business segments. The company accepts various deposits, such as savings, salary, pension, and current accounts; and term deposits. It also offers housing loans, consumer loans, Saholiat/Saral finance, Saholiat/Saral finance scheme for pensioners, solar lighting and photo voltaic finance, laptop/ PC finance, scooty finance for girls/ladies, festival advance scheme, education loan scheme, smartphone finance, car and two-wheeler loans, and coaching fee loan scheme. In addition, the company provides finance for commercial vehicles, school buses, passenger buses/mini buses, craft development, craftsmen, handicrafts, commercial premises, contractor, mini sheep farm establishment, construction equipment, small businessmen, and travel and tourist taxi operators; mortgage loans for trade and service sector, loans against mortgage of immovable property, fair price shop scheme, and ATV/snowmobile finance scheme; and agricultural loans. Further, it offers mutual funds, life and non-life insurance products, and nonresident banking services; and support services, such as core banking, Internet and mobile banking, ATM, and merchant acquiring services, as well as debit and credit cards. Additionally, the company provides cash management services, including real time gross settlement and national electronic fund transfer services; and third party services comprising remittance services. As of March 31, 2018, it operated 904 branches in 20 states and 1 union territory; and 1,199 ATM’s. The Jammu and Kashmir Bank Limited was incorporated in 1938 and is headquartered in Srinagar, India.
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