JPMorgan Chase Valuation!

Dear Reader,


Here I am going to attempt to value JPMorgan Chase, the New York based global bank.

Regarding market capitalization at 423.55 billion USD the market capitalization JPMorgan Chase is the stellar performer among global banks and certainly the largest US based bank in terms of market value.

Is this large market capitalization of JPMorgan Chase justified? Almost. I think JPMorgan Chase is 15% overvalued at the current market environment or otherwise said JPMorgan Chase should have a market capitalization of circa 360 billion USD to exactly reflect its intrinsic value. Yes, I know JPMorgan Chase made 30.709 billion USD in profit in 2018 so its trailing Price/Earnings ratio at 13.33 does not look so high. But it is still not very low, either. The current economic environment can be best described as boom times. May be not such a pronounced economic boom as in 2008, but economic boom, nonetheless. And banks are generally a leveraged play on economic growth. So I do not think things can get any better for JPMorgan Chase.

Yes, central bank stimulus postponed the coming recession from 2020 to the second half of 2021, but the inevitable will happen and the USA, along with the rest of the world, will experience a contraction of economic activity relatively soon. That said, the stocks of US commercial banks majors such as JPMorgan Chase, Bank of America, Citigroup and Wells Fargo should not fall too much in the coming recession, or at least not so much as the stocks of the top technology companies, which are significantly overvalued. At 2.67% JPMorgan Chase's dividend yield is quite high and JPMorgan Chase's stable business mix should provide a relative protection in times of economic crisis, which are close. In times of slow or negative economic growth value stocks, which in the current market environment can be defined as energy and  financials, should significantly outperform growth stocks, technology stocks especially. 

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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich