J.P. Morgan stock is recommended as a buy. The intrinsic value is estimated at $80 based on valuation models, which is above the current price of $68, representing an upside of over 17%. J.P. Morgan is one of the largest banks in the U.S. and globally with strong brand recognition and a diversified business across consumer banking, corporate and investment banking, asset management, and commercial banking. Financial ratios show good profitability and leverage. The recommendation is supported by multiple valuation approaches showing the stock is undervalued at the current price.

1. J.P. Morgan
Recommendation:
BUY
Intrinsic Value $80 > $68 Current Price
Mengjia Guan, Vy Le, Yuli Qian
Professor Lawrence Souza

2. Overview
● Background
● Financial Conditions
● Stock Valuation
● Recommendation

3. Background
● Type: Public
● Traded as: NYSE, JPM
● Founded: 2000
● Founder: J. P. Morgan
● CEO: James Dimon
● Headquarters: New York City, NY
● Industry: Investment and Customer Banking
● Area Served: Worldwide
● Number of employees: 265,259 (2015)
● Market Value of Stock: $67.89 (Dec. 2015)
● Assets: US$ 2.6 trillion (2014)

4. Operation Segment
● Consumer and Community Banking 46%
● Corporate and Investment Bank 34%
● Asset Management 12%
● Commercial Banking 7%

5. Products and Services
● Markets & Investor Services
● Treasury Services
● Investment Management
● Private Banking
● Wealth Management & Brokerage

6. Leadership
Jamie Dimon
Chairman and Chief
Executive Officer
2004, 11 years
Harvard Business
School
Marianne Lake
Chief Financial
Officer
2007, 8 years
Reading University
Gordon Smith
CEO, Consumer &
Community Banking,
Chase
2007, 8 years
Thunderbird School of
Global Management
Doug Braunstein
Executive Vice
President and Chief
Financial Officer
1986, 29 years
Harvard Law School
Jes Staley
Chief Executive
Officer—Investment
Bank
1979, 36 years
Bowdoin College
Todd Maclin
Chief Executive
Officer—Consumer &
Business Banking
1982, 33 years
University of Houston

7. S.W.O.T Analysis
Strength
● Strong brand name and good financial position
● Excellent services for customers through extensive
retail network
● Largest bank in US in terms of sales, market value,
assets and profits
Weakness
● Overdependence on the U.S. market
● Stiff competition from other financial service providers
● Fluctuating markets result in instability
Opportunity
● Expansion in other countries
● Investments across the world
● Commercial banking, and JVs
Threats
● Changing government regulations and financial crisis
like recessions
● Unstable mortgage market

8. Bank Ranking
Rank Institution Name Total Asset($T)
1 JPMorgan Chase 2.58T
2 Bank of America 2.14T
3 Citigroup 1.83T
4 Well Fargo 1.74T
5 Goldman Sachs 865B

9. Financial Conditions
Sources: Morningstar
Financial Ratio
Goldman
Sachs JP Morgan Wells Fargo
Bank of
America Peer Group
Industry
Average Conditions
Profitability (%)
ROA 0.9 0.8 1.3 0.5 0.9 0.5 Good
ROE 10.5 9.8 13.1 4.5 9.4 7.3 Good
Leverage/Liquidity
Profit Margin 34.1 32.0 25.4 20.4 23.3 21.5 Good
Debt to Equity 2.5x 1.5x 1.1x 1.1x 15.7x 1.2x Average
Interest Coverage 2.5x 4.2x 7.7x 2.6x 4.2x 3.7x Good
Overall Good

10. Financial Conditions
Sources: Morningstar
Financial Ratio
Goldman
sachs JP Morgan Wells Fargo
Bank of
America Peer group
Industry
Average Conditions
Equity
Forward P/E 9.7x 9.9x 12.1x 10.3x 10.7x 10x Average
Dividend Yield% 1.2 2.6 2.6 1.2 1.7 2.3 Good
Growth Rate
Revenue
Growth%
6.2 -1.1 1.4 -3.4 1.4 -3.7 Good
Net Income
Growth%
24 4.7 13.3 49.5 28.9 4.9 Below
Overall Average

11. Technical Analysis
● Upward trend
line
● Big volume
coming
● Trending
towards $80
● Current Price
$68
Target Price $80 > $68 Current Price
Trend Line
Support
Resistance

12. Valuation: Perpetuity Model
Discount Rate Stock Value Range
WACC 8% $93 High
ERM 9% $80 Medium
CAPM 10% $71 Low
Intrinsic Value $80 > $68 Current Price Premium 17%
CAPM
Risk-Free Rate 3%
Beta 1.2
ERM 9%
R 10%
Year 2014 Estimated 2015 Estimated 2016
EPS $5.29 $6.45 $7.22
Growth 22% 22% 12%

13. Valuation: Gordon Growth Model
i g 1% 2% 3%
i WACC: 8% $ 103 $ 120 $ 144
i CAPM: 10% $ 80 $ 90 $ 103
i ERM: 8% $ 90 $ 103 $ 120
Intrinsic Value $80 > $68 Current Price Premium 18%
CAPM
Risk-free rate 3%
Beta 1.2
ERM 9%
R 10%
Year 2014 Estimated 2015 Estimated 2016
EPS $5.29 $6.45 $7.22
Growth 22% 22% 12%

14. Valuation: Multiple Model
P/E Multiple U.S. Bank Wells Fargo BOA J.P. Morgan
Goldman
Sachs Citigroup
Estimated
2015
13.8x 13.3x 12.2x 11.1x 10.1x 9.7x
P/E Ratio Stock Value Range
13x $ 94 High
12x $ 87 Medium
11x $ 79 Low
Intrinsic Value $79 > $68 Current Price Premium 17%

15. Valuation: DCF Model
Year 2016 2017 2018 2019 2020 2021-TV
EPS 7.22 7.80 8.27 8.6 8.77 8.86
Growth Rate 12% 8% 6% 4% 2% 1%
PV 6.6 6.5 6.4 6.1 51.6 83
Value $79
Weighted Debt 60%
Weighted Equity 40%
R Debt 7%
R Equity 9%
WACC 8%
WACC Stock Value Range
8% $82 High
9% $79 Medium
10% $76 Low
Intrinsic Value $79 > Current Price $68 Premium 16%

16. Recommendation BUY
Intrinsic Value Scenario 3 Scenario 2 Scenario 1
Perpetuity - $80 5% 10% 25%
Gordon Growth - $80 5% 10% 25%
Multiple - $79 40% 30% 25%
DCF - $79 50% 50% 25%
Sum $79 $80 $78
Intrinsic Value $80 > Current Price $68 Premium 18%

17. Recommendation BUY
Trades:
● Buy Stock
● Buy on Margin
● Buy Calls
● Write Puts
● Buy Financial Services ETFs
● Buy Financial Services ETFs on Margin
● Buy Calls on Financial Services ETFs
● Write Put on Financial Services ETFs
Intrinsic Value $80 > $68 Current Price

18. Questions and Answers

19. Resources
“JP Morgan and Chase” MBAskool, BrandGuide Banking & Financial Services, Web. 4 DEC.2015
Slide, Blank. Jamie Dimon Dimon, Chairman and Chief Executive Officer (n.d.): n. pag. Web.
"Welcome to Market Realist." J.P. Morgan Looks to Deepen Customer Relationships. N.p., n.d. Web. 06 Dec. 2015.