Over the past 12 months, shares of JPMorgan Chase (JPM 0.26%) have handily outperformed both its peers on the KBW Bank Index and the broader market's S&P 500. Their total return of 44.7% beats the former by roughly 7 percentage points and the latter by almost 24 percentage points. But while this performance is outstanding, it forces current and prospective investors to question whether the nation's largest bank by assets can continue to do so going forward.
According to the collective insight of banking analysts, the answer to this question is yes. The median target price of the 28 analysts surveyed by Standard & Poor's Capital IQ is $63 a share, with a high estimate of $71 and a low of $51. As of the time of writing, JPMorgan actually trades for approximately $52 per share. Consequently, if the analysts are to be believed, which is admittedly a big "if," then there's an anticipated upside of 17%.
|
Metric |
JPMorgan Chase |
KBW Bank Index |
|---|---|---|
|
Price-to-Tangible Book Value |
1.33 |
1.82 |
|
Price-to-Book Value |
1.00 |
1.25 |
|
Price-to-Earnings Ratio |
8.75 |
15.21 |
Source Standard & Poor's Capital IQ
In this case, JPMorgan's valuation lends credibility to the potential for future appreciation. At present, shares of the bank trade for 1.33 times tangible book value and 1 times book value. As you can see in the table above, those figures are 27% and 20% less, respectively, than the 24-member KBW Bank Index, of which JPMorgan is a member. In addition, its 8.75 price-to-earnings ratio is currently 42% less than the KBW and 51% less than the average stock on the S&P 500.
At the end of the day, this is a quick and rudimentary analysis that shouldn't be relied upon singularly when deciding whether or not to buy or sell shares of JPMorgan. What it shows us instead is that a deeper look at JPMorgan's shares may very well be in order given the potential for future gains.
