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JPMorgan Chase (JPM) Stock Still Looks Cheap Following Its 145% Run

Simply Wall St · 2d ago

JPMorgan Chase has delivered a very strong 3 year share price run, which now puts a sharp focus on whether the company’s current valuation is justified by the returns it earns on its capital. After that kind of performance, investors naturally start asking if the bank’s profitability on the equity and assets it deploys still supports today’s price tag.

  • Over the past 3 years the stock has returned about 144.7%, which puts a large amount of recent shareholder wealth on the line if the underlying return on capital story does not match the price.
  • Recent moves such as JPMorgan Chase planning up to US$1b in debt financing support for suppliers through the Michigan LIFT initiative and considering a US$3.8b construction loan in New York can shape how much capital the bank commits, the risks it takes on its balance sheet, and the returns it may earn on that capital over time.
  • What if you looked at JPMorgan Chase through its earnings instead? See why JPMorgan Chase's 13.9x P/E tells a different valuation story.

The issue now is whether the returns JPMorgan Chase generates on the capital it invests are strong enough, and durable enough, to support where the stock trades today.

If you want a broader starting point for ideas alongside JPMorgan Chase, consider using a focused stock screen built around 27 high quality undervalued stocks.

Is JPMorgan Chase Still Cheap on Excess Returns?

The Excess Returns model looks at what JPMorgan Chase earns on shareholder capital above the return investors typically require. Here, the headline is that analysts expect stable earnings per share of $26.73 against a book value of $133.01 per share, which implies an average return on equity of 17.96%. The model compares that to a cost of equity of $11.89 per share and arrives at an estimated excess return of $14.84 per share, supported by a projected stable book value of $148.87 per share.

Those inputs help explain why this framework puts JPMorgan Chase's estimated intrinsic value substantially above the current share price of $332.38. The Dividend Discount side of the work up uses a dividend per share of $6.84, with an expected dividend growth rate capped at 3.7% and a payout ratio of 26.98%. This points to scope for reinvestment as well as ongoing distributions. Jefferies trimming its target while still highlighting a strong decade of returns helps show why some analysts see less upside at today's level, even though the Excess Returns model suggests a richer underlying worth. Find out what JPMorgan Chase could be worth using our Excess Returns estimate.

The JPMorgan Chase Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the valuation puzzle for JPMorgan Chase leaves off and explain which assumptions about growth, profitability and earnings would need to hold for the stock to be worth materially more or less than today's price. They sit on the platform's Community page. Each one sets out JPMorgan Chase's implied fair value as a thesis about the business that you can revisit over time, rather than treating valuation as a one off snapshot.

Community views on JPMorgan Chase split between those who see more upside in the long term build out and those who think the current price already reflects most of the good news.

Bull case: 12% undervalued

"Management's confidence in organic and inorganic growth, together with sustained capital deployment into new business lines such as the multi year build out of CIB and Payments, the $1.5 billion Security and Resiliency financing program and the expansion of omnichannel consumer banking and branch builds, supports a case for structurally higher long-term revenue and earnings relative to the current cost base..."

Discover why this Narrative puts JPMorgan Chase at 12% undervalued.

Bear case: roughly fairly valued

"Bearish analysts expect JPMorgan Chase to see its net and operating margins squeezed if higher expenses, tighter underwriting in areas like data centers, and pockets of consumer stress persist without matching revenue support..."

Explore why this Narrative puts JPMorgan Chase at roughly fairly valued.

Before you act on JPMorgan Chase's valuation, one more piece of the puzzle matters

Price, returns on capital and market narratives only tell part of the story for JPMorgan Chase, because our broader checks have also highlighted specific concerns that investors may want to review in detail. Take a closer look at 1 warning sign before settling on a valuation.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.