In this article I am going to analyze JPMorgan Chase & Co Stock which its ticker (JPM). I am going to use Price/Book value ratio the same as I did with other financial organizations.
First let us see what is the growth rate of JPM’ Book or equity value through the last five years:
As you can see the equity increased from year 2017 where it was 255.69 Billion until it reached 292.33 Billion in 2022 with growth rate equal to 2.7%.
Now that we have the growth rate of JPM equity in the last years, we are going to use this growth rate to estimate what will its equity be in 2027 ,which is five years from now by applying the following formula:
FV=PV(1+i)n
- Where
- PV = JPM Equity in year 2022 = 292.33 Billion.
- i = growth rate of Book value estimated above = 2.7%
- n = years of investment = 5 years in 2027
By substitute the numbers estimated early in the above formula, I end up with JPM Equity in year 2027 equal to 333.98 Billion$.
Second, we need to find how much the equity per share will be in 2027 and all what we need to do is to divided the estimated equity above for year 2027 by the total number of shares for JPM and that will equal to:
(Equity/Share)= (333.98 Billion) / (2.94 Million) = 113.59
Now we will see how does the (Price/Book or equity) ratio was doing in the last five years:
Now we can estimate two scenarios for JPM’s stock price which is Bull market and the bear market.
For Bull market, I am going to take the highest (P/B) ratio which was 1.52 in year 2021, to see what will be the price of JPM’s stock in 2027:
Bull market JPM Stock’s price in 2027= (1.52)*(113.59) = 172.65$.
For Bear market, I will take the lowest (P/B) ratio which was 1.09 in year 2018, to see what will be the price of JPM’s stock in 2027.
Bear market JPM Stock’s price in 2027= (1.09)*(113.59) = 123.8$.
As of writing this article, JPMorgan Chase & Co stock price is 130.75 $ which is below the Bull market estimated price and above Bear market estimated price, therefor, I believe I am going to wait for a correction movement for the stock to hit the price of bear market or near by and then invest in AXP’s stock, however if this condition does not satisfy, then I am going to pass this investment.
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