Here’s The One Chart That Says JPMorgan Chase Stock is Still a Buy

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JPM stock - Here’s The One Chart That Says JPMorgan Chase Stock is Still a Buy

Admittedly, the shares of JPMorgan Chase & Co. (NYSE:JPM) may not be the screaming buy it was a few years ago, but JPM stock still looks cheap. With Federal Reserve policy weighing on bank stocks, the pullback has created an opportunity to either start or add to a position.

It may be odd to hear about a $340 billion banking conglomerate expanding its retail presence — that is, its brick-and-mortar branch locations in several states — but that’s exactly what JPM is doing. And while they aren’t a fast food purveyor, selling burgers and hot dogs, their physical presence is a key part of building their brand and improving access for customers — retail and commercial alike. CEO Jamie Dimon plans to open an additional 400 branches over the next few years.

Together with its new You Invest digital investing platform, the branch expansion is part of a portfolio of initiatives that position JPM extremely well for any kind of economic environment.

JPM Sets Yet Another Record

Last year, JPMorgan again generated record revenue and net income, even when you net out the impact of tax reform. The bank reported net income of $32.5 billion on revenue of $111.5 billion. Every business line grew on both top and bottom lines, producing in a very strong year for JPM.

Not content to rest on their laurels, the bank continued to make investments in products, services, and technology. JPM grew core loans by 7%, increased deposits in total by 3%, and grabbed more market share across businesses, without overextending their balance sheet.

The Chart that Matters Most for JPM Stock

The chart that JPM stock investors should focus on doesn’t illustrate net revenue, which is up 9% year-over-year. Nor does it show net income per diluted share, which is up a staggering 43% year-over-year, a growth number that one doesn’t expect to see outside fast-growing tech companies. The difference here is that compared to tech startups, JPM actually has real earnings.

No, the chart (see above) that truly matters — and Dimon agrees — is tangible book value. He wrote in his annual letter to shareholders:

“As you know, we believe tangible book value per share is a good measure of the value we have created for our shareholders. If our asset and liability values are appropriate — and we believe they are — and if we can continue to deploy this capital profitably, we think we can continue to exceed 15% return on tangible equity for the next several years…”

So long as Dimon and company can continue to earn returns in excess of 15% (likely up to 17% in the near-term), JPMorgan stock will be worth much more than tangible book value. Given how the CEO has led JPM to record results in eight of the last nine years, there is no shortage of confidence that he can continue to deliver in the future.

Final Note on JPM Stock

As long as Jamie Dimon is steering this ship, I am inclined to stay aboard. Since becoming CEO, JPM has outperformed the S&P 500 index by 7% on a compounded basis. The results speak for themselves. JPMorgan stock is also paying investors a dividend yield that’s a few points above 3%.

He is a master capital allocator, which you want and need in a deflationary environment. So long as the Federal Reserve decides to keep interest rates low, it will be harder for banks to make money.

The stock has run up in the last couple of years, but tangible book value also continues to march upward. JPM stock is not as cheap as it once was, but it is certainly the standout among bank shares. The continued dividend increases (28% YoY) is just icing on the cake.

As of this writing, Luce Emerson was long JPM.


Article printed from InvestorPlace Media, https://investorplace.com/2019/04/heres-the-one-chart-that-says-jpmorgan-chase-stock-is-still-a-buy/.

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