JPMorgan Chase & Co. (JPM) is a reputed global financial service and has a market cap of over $127 billion. As a brand it comprises of a number of financial subsidiaries, banks and asset management firms and its activities are broadly divided into six business segments, encompassing both wholesale and retail sectors. Over the years the company has earned the nickname “King of downturns” for itself and has been generating healthy revenue and net income even during the current economic downturn. Currently it functions at a very high operating margin of about 36% and has a trailing EPS of about $4.5. As a result, its valuations are well placed vis-à-vis the industry’s average with its P/E ratio being just about 7.44 as against 9.32 of the industry. …show more content…
The company has emerged even stronger after the economic downturn and in the recent past has made a few acquisitions to ensure future growth. Even though its revenue was down to $20.6 billion for the year 2011, it managed to beat analysts’ estimates where its profit figures were concerned. It also involves itself in philanthropic activities like Environmental Grant Program to enhance its brand value. Hence, with its double digits growth in earnings per share in the first quarter of 2012 and its image building exercise, I believe its common stocks to be promising for …show more content…
The valuation of the company is also fairly high thanks to a price multiple of almost 13.7 against 7 of JP Morgan’s. Presently, it is planning to make a foray into the Japanese property market with an investment of approximately 50 billion yen ($628 million) as reported by Bloomberg. Goldman expects that the Japanese real estate market would eventually turn around and provide it with handsome returns post recovery, which in my opinion, is indeed a possibility. However, till date the company is considered as one of the primary culprits for the sub-prime crisis and therefore various litigations are underway against it. Hence, I do not recommend any investment in it in the immediate future it till both better image and further clarity emerges. Another competitor, the Citigroup (C) had its share of turmoil through plunging of its shares. Currently, it is still finding its foot after a $45 billion bailout package of the federal government. Even though the firm has accrued moderate earnings, it has been showing a declining profit in the last five consecutive years. Therefore, though the current price multiple of only 7.07 may look attractive, in my opinion investors should give this company a miss as an investment bet till the world economy