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Company Stock Analysis J. P. Morgan Company

COMPANY STOCK ANALYSIS 1

CompanyOverview

J. P. Morgan Chase &amp Co. is renowned as one of the world’soldest, largest, and best-known commercial institutions. It wasfounded in 1799, New York where its predecessor was chartered andsince its advent, the company has succeeded and grown by listening totheir customers and meeting their needs (JP Morgan Chase &amp Co.,2008 Annual Report, 2014). As an international company, J. P. MorganChase &amp Co. operates in more than 100 countries around the world.It combines two of the world’s commercial brand, which comprises ofJ.P. Morgan and Chase. According to the 2015 Annual Report, the firmis leading in the speculation banking, financial transactionprocessing, asset management, financial services for consumers, smallbusiness and commercial banking, and private equity (JP Morgan Chase&amp Co./ Annual Report, 2015 Annual Report, 2014). On the otherhand, the firm serves millions of consumers if the United States andmany of the world’s most protuberant corporate, official, andgovernmental clients under its JP Morgan &amp Chase brands. Thecompany has over 235,000 employees that serve millions of consumersand small business (JP Morgan Chase &amp Co., 2008).

The company is the global leading financial service with assets of$2.4 trillion. The firm is constructed by more than 1200 predecessorinstitutions. Some of her major heritage firm include ChaseManhattan, Chemical, Manufactures Hanover and Bank One, FirstChicago, and National Bank of Detroit. The company functions itsbusiness through the subsequent sections: The Consumer and CommunityBanking section that serves customers and productions through privateprovision at bank outlets and over automated teller machine, online,mobile, and phone banking. It is prearranged into Mortgage Bankingand Card, Consumer and Business Banking, Merchant Services and Auto‘Card’ (JP Morgan Chase &amp Co./ Annual Report, 2015 AnnualReport, 2014). Consumer and Business section banking propositionsdeposit and speculation products and amenities to customers, andloaning, payment, and cash supervision and payment solutions to smallproductions (JP Morgan Chase &amp Co./ Annual Report, 2015).Mortgage Banking embraces mortgage inauguration and repairingactions, as well as groups encompassed of cover mortgages and homeevenhandedness loans, covering the learnt credit reduced collectionintegrated into the Washington Mutual operation (JP Morgan Chase &ampCo./ Annual Report, 2015). Card segment provides credit cards tocustomers, and small trades provide repayment services to profitableand municipal sector customers through its lucrative card products,offers sum dispensation facilities to suppliers, and delivers autoand student loan services (JP Morgan Chase &amp Co./ Annual Report,2015).

The Corporate and Investment Bank section deals in a broad suite ofinvestment banking, market-making, prime brokerage, and capital andsanctuaries products and services to an international client base oforganizations, stakeholders, financial institutions, administrationand municipal entities. This segment offers a full array ofinvestment banking products and services in all leading capitalmarkets, comprising advising on corporate approach and construction,capital-raising in equity and debt markets, as well as loaninauguration and syndication (JP Morgan Chase &amp Co./ AnnualReport, 2015). The Commercial Banking division distributescomprehensive industry information, local know-how, and enthusiasticservice to the United States and U.S. international clients,containing corporations, metropolises, commercial establishments, andnon-profit entities. This section delivers financing to real estateinvestors and vendors as well as wide-ranging financial resolutions,composed with advancing, coffers facilities, speculation banking, andbenefits organization to happenstance its client`s national andinternational monetary needs (JP Morgan Chase &amp Co./ AnnualReport, 2015 Annual Report, 2014). The Asset Management segmentprovides investment and wealth management services. This segmentoffers investment administration across all foremost assetfacilities, including impartialities, fixed income, substitutes, andmoney souk funds (JP Morgan Chase &amp Co./ Annual Report, 2015).

Companyanalysis

Thecompany focuses on adapting its business successfully and continuesto work diligently in assessing and understanding the implications ofthe regulatory changes that is currently emerging. Additionally, thefirm is devoting substantial resources to implementing all the newinstructions and guidelines while assembly the wants and outlooks ofits clients (Federal Reserve Board, 2013). Focusing on the businessperformance, JP Morgan &amp Chase believes that one of thesignificant necessities of the Dodd-Frank lawmaking reforms is theformation of a robust steadfastness authority under the Act thatempowers the FDIC to take over the failing systematically importantfinancial institution and resolve its operations and business in andorderly manner without causing systemic risk with financial system(Federal Reserve Board, 2013).

On the other hand, J.P. Morgan &ampChase is operating in morethan 100 countries internationally. According Similarly, managementhas continued to seek significant opportunities that are presented incountries that are rapidly growing and are need of strong bank inorder to ease and support lasts growth. Moreover, the organizationtrusts that commercial acquisition and strong earning power allow thefirm to thrive and will continue to allow them to manage newregulatory headways and global uncertainty (Kress, 2011). Althoughthe company’s strong capital position looks like a majordifferentiator among its competition, their diversified operationsallow them whether the storms of economic turmoil and globaluncertainty. In spite of its many business appearances, particularlythe lines complicated in more outdated banking have seen problematicperiods., the firm has remained able to influence itself through itssolider performing occupational levels to accomplish and keep andgain marketplaces share, background itself for a strong evolutionduring the retrieval.

Anotherfactor that makes the business perform both locally and globally isthe strong group team that includes of the most valued and powerfulseparate in America, for example Jamie Dimon promises the set is ingood pointers (Annual Report, 2014). J.P. Morgan’s organizationhas exposed not only accomplished continue lucrative but also topreserve constancy in what may be nastiest years the manufacturinghas faced monetary crisis in 2008.

Finally,Kress (2011) holds that clear the capital position has made thecorporation to continue to follow growth and increase market portionnationally. J.P. Morgan supposed, under the sympathetic of the newBasel III capital ethics, to be excess quantity of tier 1 mutualratio. In 2011, the steady had a ratio of 7.6 percent, which thesustenance and the stockholder supposed to be sufficient for thesupplementary supplement allegedly to be obligatory for GlobalMethodically vital Banks, which lets for countless fiscal agility(Kress, 2011). Besides, J.P. Morgan has been in the site to takebenefit of any manufacturing overcome with glitches as struggled byKress (2011). During the 2008 financial crisis, the protected was inthe site to additional upsurge its marketplace stocks and size byprocurement Bear Stearns. Also, it sustained to reinforce itsmarketplace share in their Retail Financial Service lucrative thatadds up to over 30 out of a hundred of their revenue with the gainingof Washington Mutual Bank’s banking functions (Kress, 2011).

SWOTAnalysis

Strength

JPMorgan has continued to place himself away after its principalcompetitors Citigroup and Wells Fargo by manufacture one of thetoughest advantage banking procedures both countrywide and globally,which will stretch the occupational a solid matter for future growth.JPMorgan further wired their business through the gaining of BearStearns in May of 2008 throughout the monetary crisis. What divorcesJPMorgan from having to contest with the likes of Goldman Sachs andMorgan Stanley is the fact they are much superior and expanded withother commercial sections such as commercial investment, credit cardservices, and trade financial facilities that let them to have anabundant more fixed and expanded company (Annual Report, 2015 J.P.Morgan Chase, 2016). This not only helps to have dissimilar sourcesof revenue making trades that other healthy speculation lead firmssuch as Goldman Sachs and Morgan Stanley fail to have, but it spiralsthem an abundant larger admission to greater quantities of capital,so they don’t need to income as much risk finished leveragingthemselves to such an excessive degree in which Goldman Sachs andMorgan Stanley obligation in order to stay feasible. Another forte isits organization. JPMorgan’s standing is among the bests in themanufacturing and shouldn’t be overlooked.

Weakness

Deteriorating market part in the Monetary Sector in together theUnited States and Europe necessity be spoken for the long-termaccomplishment of JPMorgan. Citigroup is in supplementary than 100dissimilar nations and numerous for protracted periods of time. HighNon-Performing Loans endures being a question for JPMorgan with over16.5 billion. JPMorgan Chase’s existing softness is in their RetailEconomic Amenities and Card Services commercial lines, which ensureto scuffle since the economic crisis of 2008. The other majorfaintness is the employment of the Volker Rule, which wouldfundamentally affect JPMorgan the greatest among its aristocraciessince it is one of the biosphere’s largest hedgerow funds andsecluded equity administrators. Incomes and pays would be reduced,but organization trusts to a useless degree as many of thevicissitudes have already been made meanwhile the instruction wassupposed to apply (Annual Report, 2015).

Opportunities

JPMorgan Chase strategies to belligerently increase in California andFlorida by inaugural over 2,000 branches within the next five years.Recently Jamie Dimon said that they might reduce the size andswiftness of development due to constant indecision and poor monetarycircumstances. Emerging marketplaces needs to be an importance forJPMorgan Chase to endure to grow with the adores of one of itsprincipal participants Citigroup. Intercontinental development willstill demonstrate to be the maximum occasions that are obtainable toJPMorgan Chase, particularly seeing its leading manufacturing capitallocation (Annual Report, 2015).

Threats

The European financial catastrophe, if it appears, greeneries 15billion net overviews for JPMorgan that is supposed to be wieldy andat worst case situation cause 2 to 3 billion in losses. Thecontamination, however, could cause chaos on capital marketplacesaround the sphere and create a common risk that may more touch them.Economic unpredictability and softness are perceptibly approximatelythat JPMorgan counting its members are facing and may linger to faceamid assumption and a conceivable reality of a double-dip downturn.Banks are exceptionally reliant on for accomplishment on therobustness and affluence of the reduced (Annual Report, 2015).Increased and raised controlling boundaries, which would maybe causethem to have to alteration certain work-related models, thus plungingrevenues, strengthening in costs and theoretically adversely affecttheir technical processes. Lawsuit and grievances are amongst theutmost threats in the manufacturing and though they are not feelingit to the same shade of its competitors such as Bank of America,JPMorgan will endure run the risks of minutes and Loan put back dueto inappropriate loan certification, among other potentials, thatwere an importance of the casing bubble (Annual Report, 2015).

On the other hand, using manifold investigation for J.P. Morgan injudgment to its manufacturing and S&ampP 500, it quite clear thatthe stock is unappreciated to the S&ampP 500 and associated with theindustry. The firm is the transaction at considerable lower P/E ratioassociated to its main contestants of about 2.17 less than the sectormiddle but has lower predictable development rate that is lower by0.47 that manufacturing median. The business trades at an advancedB/P relation than the subdivision which about 0.10 above its maincontestants associated to with the media of the manufacturing (Kress,2011). The chief argument behind this declaration is that I trustJ.P. Morgan is unprotected to the doubt of the European monetarycrisis.

Lookingat where the stock is today compared to the previous years, it quiteclear that the growth is not only higher, but also clearlyoutperformed the rise in the S&ampP 500 over the same period,despite the company’s weak earnings results as presented in Table1.

Table1: FIVE YEAR STOCK PERFORMANCE

Source: AnnualReport, 2015.

Focusingon the key ration Table 2 presents provides margin and profitabilityfrom the year 2006 to 2015.

Table2: KEY RATIOS

Source:J.P. Morgan Chase &amp Co.,2016

Table2 offers the growth in tangible of gross margin, operating margin,and profitability in the year 2016. According to the above table, thecompany is a global leader in investment and wealth management. Inthe Asset Management, the company offers investment management acrossmost major asset class including equities, fixed incomes,alternatives, and money market funds (J.P. Morgan Chase &amp Co.,2016).

Onthe financial sector

Table3: FINANCIALS

Source:Fisher College ofBusiness, 2012

TechnicalAnalysis

Focusing on the future direction of the stock, it goes without sayingthat even the best stock can decrease in a complete depressedmarketplace. Consequently, the gross margin of J.P Morgan iscurrently very high at 86.23 percent (Fisher College of Business,2012). Regardless of its high-profit margin, it has managed todecrease from the same prison of the year as presented in the Tablebelow.

Table2: STOCK PERFOMANCE

Source:J.P. Morgan Chase &ampCo., 2016

InTable of the five-year stock performance, the growth is higher andclearly outperformed the rise in the S&ampP 500. In the year 2015,the company reported a net income of $24.4 billion, and recordedearnings per rate share of $5, on net revenue of $93.5 billion. Thenet income increased by 2.7 billion compared with net income of $21.4billion in the year 2014. Growth in stock performance in the year2015 is driven by low taxes and lower non-interest expense,incompletely counterbalance by lower net income and a greatestablishment for credit losses (Fisher College of Business, 2012).

On the other hand, to understand the stock performance between theyear 2010 to 2015, the graph below shows the comparison of theCompany stock performance against KBW Bank, S&ampP Financial, andS&ampP 500. The comparison assumes that all the dividends arereinvested.

December 31st, (in dollars)

2010

2011

2012

2013

2014

2014

J.P. Morgan Chase &amp Co.

$ 100.00

$ 80.00

$ 108.98

$ 148.98

$ 163.71

$ 177.40

KBW Bank Index

100.00

76.82

102.19

140.77

153.96

154.71

S&ampP Financial Index

100.00

82.91

106.78

147.79

166.76

164.15

S&ampP500

100.00

102.11

118.44

156.78

178.22

180.67

Source:Annual Report,2015.

Source:J.P. Morgan Chase &ampCo. / Annual Report, 2015.

Accordingto the above graph, the company’s result reflects a solidunderlying performance across its four major reportable businesssegment, with continued high lending and customer deposit growth.JPMorgan has large market shares in the speculation banking andcredit card companies. Investments in its operations, counting newprofitable bankers and offices, should pay off in time. And spreadincome ultimately ought to advantage from higher interest rates. Thestock’s above-average dividend yield may hold some appeal forincome-oriented investors. But the issue has recovered from its early2016 lows and now has limited total return potential to 2019-2021.

Conclusion

Bankingservices is a recurrent business. Preliminary from 2008 J.P. Morganincome in 2009 jumped by 13 percent and has been stable until itdropped by 4.2 percent in the year 2012 due to the European crisis.However, with the high position in the non-interest income businessplus upward trend in the interest, it is predictable that the J.P.Morgan performance will be outstanding for the next five years tocome. Looking at Table 1 on the stock presentation, the company hasshown greater volatility than the average constituent of the S/P 500Index (Annual Report, 2015). J.P. Morgan company has position itselffrom its main competitors Citigroup and Well Fargo through thecreation of the strongest banking investment banking operations bothdomestically and internationally, which will be the firm a solidfoundation for future growth. Separately, the corporation is muchlarger and long-drawn-out with other business such as profitablebanking, retail financial services, and credit card facilities thatmake them have a more unchanging and differentiated company.Additionally, almost 27 percent of J.P Morgan’s making in anaverage year are generated from its investment bank, where suitablecompetitive advantages nearly impossible to achieve. However, evenconsidering the negative impact of legislation, I believe that theadditional scrutiny will eliminate JP Morgan’s capacity to generateexcess returns. This is because the company has a low-costnation-wide and international retail franchise, an active assetmanagement decision, the scale to compete in the global custody(Morningstar Research, 2011). The potential growth in this moat-goodbusiness matches the downside regulation, causing it to believe theirnarrow moat rating to be stable in the coming years.

Despite some of the daring actions, the corporation size and profitshave made the company a board of the representatives observing toscore political wealth. This has occasioned in items like futurediscounts in debit card interchange fees. Finally, I believe that thecompany has room to increase its stock sales presentation, as it hasalready met the 2019 levels under Basel III.

References

JP Morgan Chase &amp Co. (2008). The History of JP Morgan Chase &ampCo.: 200 Years of Leadership in Banking. Print.

JP Morgan Chase &amp Co. (2013). JP Morgan Chase &amp Co.Resolution Plan Public Filling. Internet resource.

J.P. Morgan Chase (2016). J.P. Morgan Chase &amp Co.: Our BusinessPlan. Internet resource.

Fisher College of Business. (2012). JP Morgan Chase &amp Co.Diversified Financial Services. Equity Research StudentInvestment Management Program. Colombus, OH.

J.P. Morgan Chase &amp Co. (2014). 2014 Annual Report.

J.P. Morgan Chase &amp Co. (2015). 2015 Annual Report.

Kress, W. (2011). J.P. Morgan Chase &amp Co. (JPM). Internetresource

Morningstar Corporate Credit Research. (2011). J.P. Morgan ChasePlans New Five-Year Benchmark Issuance. Print.