Is JPMorgan Chase stock overvalued or undervalued?


JPMorgan Chase & Co. (NYSE: JPM) topped the S&P 500 in 2021, generating a cumulative total return of 31.4%.

JPMorgan is still showing strong growth numbers, but with a market cap of $ 489 billion, some investors are wondering if there is any value left in JPMorgan shares.

Earnings: A price-to-earnings (PE) ratio is one of the most basic fundamental measures to assess the value of a stock. The lower the PE, the higher the value. For comparison, the S&P 500’s PE is currently around 33.4, more than double its long-term average of 15.9.

JPMorgan’s PE is currently 11.1, less than a third of the average for the S&P 500 as a whole. JPMorgan’s PE ratio is down 2.5% over the past five years, suggesting the stock is currently listed at the low end of its historic valuation range.

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Growth: Looking ahead to the next four quarters, the S&P 500 futures PE ratio looks much more reasonable at just 20.3. JPMorgan’s 10.3 multiple of futures earnings is still about half the multiple of the S&P 500 as a whole, making JPMorgan stock appear undervalued.

JPMorgan’s futures PE ratio is even significantly lower than its peers in the financial industry, which currently average a forward earnings multiple of 14.

However, when it comes to valuing a stock, profits aren’t everything.

Growth rate is also critical for businesses that build their bottom line quickly. The price / earnings / growth ratio (PEG) is a good way to incorporate growth rates into the valuation process. The overall PEG for the S&P 500 is currently around 0.9; JPMorgan’s PEG is 1.35, which suggests that JPMorgan is currently slightly overvalued after taking into account its impressive growth.

The price-to-sales ratio is another important valuation metric, especially for unprofitable companies and growth stocks. The S&P 500’s SP ratio is currently 3.08, well above its long-term average of 1.62. JPMorgan’s PS ratio is 8.4, nearly triple the S&P 500.

Finally, Wall Street analysts see little value in JPMorgan stock over the next 12 months. The average analyst price target among the 23 analysts covering JPMorgan is $ 175, suggesting a rise of about 4.6% from current levels.

The verdict: At its current price, JPMorgan stock appears to be slightly undervalued based on a sample of common fundamental valuation metrics.

Jamie Dimon, CEO of JPMorgan Chase. Benzinga file photo by Dustin Blitchok.

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