1 Date:_10/9/2012___ Analyst Name:___Scott R. Mertens___ CIF Stock Recommendation Report (Fall 2012) Company Name and Ticker:_JPMorgan Chase_(JPM)____________ Section (A) Summary Recommendation Buy: Yes Target Price: $49.24 Stop-Loss Price: $29.44 Sector: Financial Services Industry: Diversified Financials Market Cap (in Billions): $158.3 Billion # of Shrs. O/S (in Millions): 3,798.75 Current Price: $41.38 52 WK Hi: $46.49 52 WK Low: $28.28 EBO Valuation: $44.33 Morningstar (MS) Fair Value Est.: $51.00 MS FV Uncertainty: Above Average MS Consider Buying: $30.60 MS Consider Selling: $79.10 EPS (TTM): 4.32 EPS (FY1): 4.77 EPS (FY2): 5.20 MS Star Rating: Four Stars Next Fiscal Yr. End ”Year”: 2012 “Month”: December Last Fiscal Qtr. End: Less Than 8 WK: No If Less Than 8 WK, next Earnings Ann. Date: Yes – 10/12/2012 Analyst Consensus Recommendation: Outperform Forward P/E: 7.90 Mean LT Growth: 7.15% PEG: 0.90 Beta: 1.33 % Inst. Ownership: Inst. Ownership- Net Buy: Y N Short Interest Ratio: Short as % of Float: Ratio Analysis Company Industry Sector P/E (TTM) 9.64 20.17 32.94 P/S (TTM) 1.69 4.61 5.32 P/B (MRQ) 0.86 1.52 1.27 P/CF (TTM) 7.11 6.24 12.54 Dividend Yield 2.88 2.27 1.98 Total Debt/Equity (MRQ) 367.88 154.25 150.21 Net Profit Margin (TTM) 19.12 19.09 16.84 ROA (TTM) 0.79 0.52 0.91 ROE (TTM) 9.24 6.59 5.55
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CIF Stock Recommendation Report (Fall 2012) · price for JPM is between its current 52-week high and Morningstar’s expected target price. If my target price is met, a 19% return
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Date:_10/9/2012___
Analyst Name:___Scott R. Mertens___
CIF Stock Recommendation Report (Fall 2012)
Company Name and Ticker:_JPMorgan Chase_(JPM)____________
Section (A) Summary
Recommendation Buy: Yes Target Price: $49.24
Stop-Loss Price: $29.44
Sector: Financial Services
Industry: Diversified Financials
Market Cap (in Billions): $158.3 Billion
# of Shrs. O/S (in Millions): 3,798.75
Current Price: $41.38
52 WK Hi: $46.49
52 WK Low: $28.28
EBO Valuation: $44.33
Morningstar (MS) Fair Value Est.: $51.00
MS FV Uncertainty: Above Average
MS Consider Buying: $30.60
MS Consider Selling: $79.10
EPS (TTM): 4.32
EPS (FY1): 4.77
EPS (FY2): 5.20
MS Star Rating: Four Stars
Next Fiscal Yr. End ”Year”: 2012 “Month”: December
Last Fiscal Qtr. End: Less Than 8 WK: No
If Less Than 8 WK, next Earnings Ann. Date: Yes – 10/12/2012
Analyst Consensus Recommendation: Outperform
Forward P/E: 7.90
Mean LT Growth: 7.15%
PEG: 0.90
Beta: 1.33
% Inst. Ownership: Inst. Ownership- Net Buy: Y N
Short Interest Ratio: Short as % of Float:
Ratio Analysis Company Industry Sector
P/E (TTM) 9.64 20.17 32.94
P/S (TTM) 1.69 4.61 5.32
P/B (MRQ) 0.86 1.52 1.27
P/CF (TTM) 7.11 6.24 12.54
Dividend Yield 2.88 2.27 1.98
Total Debt/Equity (MRQ) 367.88 154.25 150.21
Net Profit Margin (TTM) 19.12 19.09 16.84
ROA (TTM) 0.79 0.52 0.91
ROE (TTM) 9.24 6.59 5.55
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Investment Thesis: I believe JPMorgan Chase will be a terrific investment for the Cougar Investment Fund. JPM provides exposure to the financial services sector, and includes slightly higher risk than the S&P 500 (1.33 beta). Performance of large banks such as JPM closely follows global economic events. Though there is some uncertainty in the Euro-crisis and future political results, analysts are generally very bullish on JPM. Being such as large financial institution, JPM is highly covered by analysts of all types. General consensus amongst different rating websites is moving towards ‘Buy’ and ‘Outperform’ ratings. JPM has performed very strong in the past several weeks, and I believe this will continue into Q1 of 2013. The fact that JPM has substantially underperformed the S&P 500 in the past six months is also promising (shows potential to outperform). I have set my target price for JPM is between its current 52-week high and Morningstar’s expected target price. If my target price is met, a 19% return on the equity is feasible.
Summary Provide brief summary of your analysis in each section that follows
Company Profile: One of the largest banks in the financial services sector. One of the largest banks in the diversified financial services industry. Large exposure and highly regulated.
Fundamental Valuation: JPM is more properly valued by its P/B ratio. All large banks have seen a significant decline in valuation during recent years, making P/E difficult to use.
Relative Valuation: JPM’s valuation is similar to its competitors. When using the ‘Relative Valuation’ method, the company’s future potential appears to be flat.
Revenue and Earnings Estimates: JPM has met or exceeded analyst expectations for earnings in each of the past nine quarters. Q3 results will be released on 10/12/2012.
Analyst Recommendations: Generally ‘Buy’ and ‘Outperform’. Analysts appear to be very bullish on JPM.
Institutional Ownership: Very high. Large institutional ownership is understandable for a bank as large as JPM. Nearly 70% institutional owners.
Short Interest: Short-term interest is consistent with that of competitors BAC and WFC. Large volatility was experienced in September.
Stock Price Chart: JPM has underperformed the S&P 500 in recent months. Over the past six months, JPM has delivered performance nearly 10% below the S&P 500.
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Section (B) Company Profile (two pages maximum)
Company Summary:
JPMorgan Chase is a large financial holding company which provides financial services
worldwide. Consumers are often familiar with its branch locations, titled ‘JPMorgan Chase
Bank’. It is a leading global financial services firm, as well as one of the largest banking
institutions in the United States. JPM is a leader in investment banking, consumer financial
services, commercial banking, asset management, and private equity. The company has $2.3
trillion in assets, and $183.6 billion in stockholders’ equity.