The calculations below outline how an intrinsic value for JPMorgan Chase 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.
Note the calculations below are per share.
See our documentation to learn about this calculation.
Excess Returns = (Stable Return on equity – Cost of equity) (Book Value of Equity per share)
$2.82 = (13.66% – 9.79%) * $73.00)
Terminal Value of Excess Returns = Excess Returns / (Cost of Equity - Expected Growth Rate)
$38.56 = $2.82 / (9.79% - 2.47%)
Value of Equity = Book Value per share + Terminal Value of Excess Returns
$111.56 = $73.00 + $38.56Inputs used in model:
Stable EPS = Stable Book Value * Return on Equity
$9.97 = $73.00 * 13.66%
Source: Weighted future Return on Equity estimates from 16 analysts.
Book Value of Equity per Share: $73.00
Source: Weighted future Book Value estimates from 16 analysts.
Expected Growth Rate: 2.47%
Source: Risk Free Rate/ 10 year Government Bond Rate in USD.
Value per share:
Current discount (share price of $115.19): -3.25%
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 9.79% = 2.47% + (0.972 * 7.53%)
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($394,505,827,543).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.972 = 0.494 (1 + (1- 40%) (141.61%))
Levered Beta used in calculation = 0.972
This company is a bank or financial institution, which is analysed accordingly below.
Mr. James Dimon, also known as Jamie, has been the Chairman and Chief Executive Officer of JPMorgan Chase & Co. since December 31, 2006 and December 31, 2005 respectively and served as its President until January 29, 2018. Mr. Dimon served as the Chief Executive Officer of Bank One Corporation from March 27, 2000 to July 2004. He served as the Chief Executive Officer and Chairman of Bank One Wisconsin. He served as the Chief Operating Officer of JPMorgan Chase & Co. from July 1, 2004 to December 31, 2005. Mr. Dimon served as a Co-Chief Executive Officer of Salomon Smith Barney Holdings Inc., is a subsidiary of Citigroup Inc. from October 1998 to November 1998. He served as the Chief Executive Officer of Smith Barney Holdings, Inc. From November 1998 to March 2000, he was a Private Investor. He served as the President of Citigroup Inc., from October to November 1998. Mr. Dimon served as the President and Chief Operating Officer of J.P. Morgan & Co. Inc. since January 2004. He had extensive experience at Commercial Credit Company and American Express Company. From November 1993 to October 1998, he served as President and Chief Operating Officer of Travelers Group Inc., as well as serving in several other executive positions with Travelers' subsidiaries Smith Barney Inc. and Salomon Barney Inc. during that period. Mr. Dimon served as the Chairman at The Clearing House LLC. He served as the Chairman of Smith Barney Holdings, Inc. He served as Chairman of Bank One Corporation from March 27, 2000 to July 2004. He served as the Chairman of Citigroup Inc. from October 1998 to November 1998. He has been an Executive Director of JPMorgan Chase & Co. since 2000. He serves as Director of Kennedy Center Corporate Fund, The Partnership for New York City, Inc. and Catalyst Inc. He served as a Director of Bank One Corporation since 2000 and Yum! Brands Inc. since 1997. He serves as Vice Chairman of The Business Council. He served as Director of The Federal Reserve Bank of New York until December 31, 2013. He serves as a Director of College Fund/UNCF and Harvard Business School. He serves as a Trustee of The University of Chicago and New York University Medical Center and a Director of the National Center for Addiction and Substance Abuse. He served as a Director of Chicago Clearing House Association. He served as a Director of Smith Barney Holdings, Inc. He serves as Co-Chair of Commission to Enhance Competitiveness for Financial Services Roundtable. He is Member of Executive Committee at Business Roundtable, The. Mr. Dimon graduated from Tufts University in 1978 and received an MBA from Harvard Business School in 1982.
Average tenure and age of the JPMorgan Chase management team in years:
Average tenure and age of the JPMorgan Chase board of directors in years:
Growth expectations for JPMorgan Chase & Co (NYSE:JPM) are high, but many investors are starting to ask whether its last close at $114.28 can still be rationalized by the future potential. … A PE ratio of 17.99x and expected year-on-year earnings growth of 11.75% give JPMorgan Chase a higher PEG ratio of 1.53x. … So, when we include the growth factor in our analysis, JPMorgan Chase appears a bit overvalued , based on fundamental analysis.Simply Wall St - – Full article
View our latest analysis for JPMorgan Chase What you must know about ROE Return on Equity (ROE) is a measure of JPMorgan Chase’s profit relative to its shareholders’ equity. … JPMorgan Chase’s cost of equity is 9.75%. … Since JPMorgan Chase’s return does not cover its cost, with a difference of -0.0017%, this means its current use of equity is not efficient and not sustainable.Simply Wall St - – Full article
Growth stimulates demand for loans and impacts a borrower’s ability to repay which directly affects the level of risk JPMorgan Chase takes on. … Since the level of risky assets held by a bank impacts its cash flow and therefore the attractiveness of its stock as an investment, I will take you through three metrics that are insightful proxies for risk. … Since JPMorgan Chase’s total deposit to total liabilities is within the sensible margin at 62.44% compared to other banks' level of 50%, it shows a prudent level of the bank's safer form of borrowing and an appropriate level of risk.Conclusion JPMorgan Chase exhibits prudent management of risky assets and lending behaviour with sensible levels for all three ratios.Simply Wall St - – Full article
Examining elements like book values, along with the return and cost of equity, is suitable for assessing JPM’s intrinsic value. … The returns in excess of cost of equity is called excess returns: Excess Return Per Share = (Stable Return On Equity – Cost Of Equity) (Book Value Of Equity Per Share) = (12.02% – 9.76%) * $72.69 = $1.64 We use this value to calculate the terminal value of the company, which is how much we expect the company to continue to earn every year, forever. … This is a common component of discounted cash flow models: Terminal Value Per Share = Excess Return Per Share / (Cost of Equity – Expected Growth Rate) = $1.64 / (9.76% – 2.47%) = $22.55 Putting this all together, we get the value of JPM’s share: Value Per Share = Book Value of Equity Per Share + Terminal Value Per Share = $72.69 + $22.55 = $95.24 Compared to the current share price of $108.34, JPM is trading in-line with its true value.Simply Wall St - – Full article
Check out our latest analysis for JPMorgan Chase 5 checks you should do on a dividend stock If you are a dividend investor, you should always assess these five key metrics: Is it paying an annual yield above 75% of dividend payers? … Whilst there are few things you may like about JPMorgan Chase from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. … It may be beneficial exploring other dividend stocks as alternatives to JPMorgan Chase or even look at high-growth stocks to supplement your steady income stocks.Simply Wall St - – Full article
JPMorgan Chase & Co (NYSE:JPM) saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. … This means that the opportunity to buy JPMorgan Chase at a good price has disappeared! … If you believe JPMorgan Chase should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable.Simply Wall St - – Full article
It compares a stock’s price per share to the stock’s earnings per share. … Formula Price-Earnings Ratio = Price per share ÷ Earnings per share P/E Calculation for JPM Price per share = $97.93 Earnings per share = $7 ∴ Price-Earnings Ratio = $97.93 ÷ $7 = 14x The P/E ratio itself doesn’t tell you a lot; however, it becomes very insightful when you compare it with other similar companies. … Ultimately, our goal is to compare the stock’s P/E ratio to the average of companies that have similar attributes to JPM, such as company lifetime and products sold.Simply Wall St - – Full article
Measuring JPMorgan Chase & Co's (NYSE:JPM) track record of past performance is a valuable exercise for investors. … This means that, on average, JPMorgan Chase has been able to steadily grow its profits over the past couple of years as well. … This means that any tailwind the industry is gaining from, JPMorgan Chase is able to leverage this to its advantage.What does this mean?Simply Wall St - – Full article
JPMorgan Chase & Co. operates as a financial services company worldwide. It operates through Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management segments. The Consumer & Community Banking segment offers deposit and investment products and services to consumers; lending, deposit, and cash management and payment solutions to small businesses; residential mortgages and home equity loans; and credit cards, payment services, payment processing services, auto loans and leases, and student loans. The Corporate & Investment Bank segment provides investment banking products and services, including advising on corporate strategy and structure, and capital-raising in equity and debt markets, as well as loan origination and syndication; treasury services, such as cash management and liquidity solutions; and cash securities and derivative instruments, risk management solutions, prime brokerage, and research services. It also offers securities services, including custody, fund accounting and administration, and securities lending products for asset managers, insurance companies, and public and private investment funds. The Commercial Banking segment offers financial solutions, including lending, treasury, investment banking, and asset management to corporations, municipalities, financial institutions, and nonprofit entities, as well as financing to real estate investors and owners. The Asset & Wealth Management segment provides investment and wealth management services across various asset classes, such as equities, fixed income, alternatives, and money market funds; multi-asset investment management services; retirement services; and brokerage and banking services comprising trusts, estates, loans, mortgages, and deposits. JPMorgan Chase & Co. was founded in 1799 and is headquartered in New York, New York.
|Name:||JPMorgan Chase & Co.|
JPMorgan Chase & Co.
270 Park Avenue,
New York, 10017,
|Exchange Symbol||Ticker Symbol||Security||Exchange||Country||Currency||Listed on|
|NYSE||JPM||Common Shares||New York Stock Exchange||US||USD||05. Mar 1969|
|DB||CMC||Common Shares||Deutsche Boerse AG||DE||EUR||05. Mar 1969|
|XTRA||CMC||Common Shares||XETRA Trading Platform||DE||EUR||05. Mar 1969|
|LSE||0Q1F||Common Shares||London Stock Exchange||GB||CHF||05. Mar 1969|
|SWX||JPM||Common Shares||SIX Swiss Exchange||CH||CHF||05. Mar 1969|
|SWX||JPM||Common Shares||SIX Swiss Exchange||CH||CHF||05. Mar 1969|
|WBAG||JPM||Common Shares||Wiener Boerse AG||AT||EUR||05. Mar 1969|
|SNSE||JPM||Common Shares||Santiago Stock Exchange||CL||USD||05. Mar 1969|
|BVC||JPM||Common Shares||Bolsa de Valores de Colombia||CO||COP||05. Mar 1969|
|BMV||JPM *||Common Shares||Bolsa Mexicana de Valores||MX||MXN||05. Mar 1969|
|NYSE||JPM.PRA||DEP 1/400 PFD P||New York Stock Exchange||US||USD||31. Jan 2013|
|NYSE||JPM.PRG||DEP SHS PFD||New York Stock Exchange||US||USD||01. Jun 2015|
|NYSE||JPM.PRF||DEP SHS 1/400||New York Stock Exchange||US||USD||09. Feb 2015|
|NYSE||JPM.PRE||DEP 1/4PFD 6.15%||New York Stock Exchange||US||USD||15. Jul 2008|
|NYSE||JPM.PRG||DEP 1/4PFD 5.49%||New York Stock Exchange||US||USD||15. Jul 2008|
|NYSE||JPM.PRF||DEP 1/4PFD 5.72%||New York Stock Exchange||US||USD||15. Jul 2008|
|NYSE||JPM.PRB||DEP SHS RP PFD T||New York Stock Exchange||US||USD||27. Jan 2014|
|NYSE||JPM.PRE||DEP SHS PFD W||New York Stock Exchange||US||USD||18. Jun 2014|
|NYSE||JPM.PRH||DEP SHS REP PFD||New York Stock Exchange||US||USD||24. Jul 2015|
|DB||CMC6||PERP SR -R NT 6%||Deutsche Boerse AG||DE||USD||23. Jul 2013|
|BOVESPA||JPMC34||BDR EACH REPR 0.5 COM USD1||Bolsa de Valores de Sao Paulo||BR||BRL||24. Aug 2012|
|BASE||JPM||CEDEAR REP 1/10 USD2.5||Buenos Aires Stock Exchange||AR||ARS||17. Jul 2001|
|DB||CMC5||PERP -S NT 6.75%||Deutsche Boerse AG||DE||USD||17. Jan 2014|
|DB||CMC2||PERP SR NT 7.9%||Deutsche Boerse AG||DE||USD||18. Apr 2008|
|Company Analysis updated:||2018/02/22|
|Last estimates confirmation:||2018/02/22|
|Last earnings update:||2017/12/31|
|Last annual earnings update:||2017/12/31|
All dates in UTC. All financial data provided by Standard & Poor’s Capital IQ.
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.