After Earnings, JP Morgan Chase and Co. (JPM) could be a Steal at the Current Price

Most analysts agree that financial stocks, and especially banks, will perform well this earnings season. In fact, with the exception of perhaps Bank of America Corp (NYSE:BAC), most of them have fared quite well. Some have been especially good, like Goldman Sachs Group, Inc. (NYSE:GS), which has blown it out of the park ($5.60 EPS versus the analyst consensus of $3.66 EPS). No wonder shares of Goldman have jumped more than 6% after the earnings report.  And, at a P/E of 10.23x, the stock is still far from unattractive.

JPMorgan Chase & Co (NYSE:JPM)There has been, however, another bank that has a good earnings report out, but it has been overlooked by the market: JPMorgan Chase & Co. (NYSE:JPM). On Jan. 21 the American bank reported net income of $5.7 billion (up from $3.7 billion last year), and EPS of $1.39, up from last year’s $0.90, beating the analyst estimates of $1.16 (that’s roughly a 20% beat). The stock, however, barely moved on the days that followed the report, which could signal that the market has overlooked this one.

But is the market wrong? How does JP Morgan’s stock look like?

  • It trades at 8.93x earnings, which is a very low valuation, even for financial stocks. Forward P/E is even lower (at only 8.09x). From a valuation perspective, the stock is very cheap.
  • It currently has an average target price of $51.29. That implies an upside potential of more than 10%.
  • The bank has posted record profits three years in a row.
  • They have successfully returned to safer business areas (such as mortgages and deposits), and yet are still a strong player in investment banking.
  • When compared to its main competitors, JPM has an edge:
Stock P/E Forward P/E Average Price Target Implied Upside from Avg PT Dividend Yield
JP Morgan 8.92 8.09 $51.29 10.51% 2.59%
Bank of America 44.56 8.70 $12 5.72% 0.36%
Goldman Sachs 10.20 9.78 $143.48 -1.24% 1.38%
Wells Fargo 10.40 8.98 $38.91 11% 2.52%

As one can see in the above table, JPM is more attractive than its main competitors in all areas except “Implied Upside from Average Price Target,” where Wells Fargo’s implied upside is very slightly above JP Morgan’s. With the exception of Bank of America’s current P/E, all stocks seem cheap, but JP Morgan is by far the cheapest of the lot.

What are insiders doing?

There seems to be some positive insider movement as well. On Jan. 29, JP Morgan Director Patrick Flynn bought 6,750 shares of the company, at $46.93 each, for a total value of roughly $320,000. This insider purchase might be a sign that company officials believe the stock is poised to outperform. However, just two days after on Jan 31, Managing Director Mary Erdoes sold 15,000 shares, so the insider picture is not as clear. No insider buying has been recorded in any of JPM’s main competitors in January, and yet there has been some insider selling this year going on at Goldman Sachs and Wells Fargo. At any rate, insider selling, unlike insider buying, is not as strong an indicator of how company officials see the their stock, so do not base an investing decision on this information alone.

Bottom Line

The market has not reacted to JP Morgan’s good earnings report. The bank has room to grow, trades at very low valuations, has an above-average dividend yield, and shows more than a 10% in implied upside when taking into account the analysts’ target price average. If an investor wants to go long on an American bank stock this year, I would definitely keep JPM in mind. With the economy recovering, and a strong bullish market forming, this stock will probably not be this cheap for too long.

The article After Earnings, this Bank Stock could be a Steal at the Current Price originally appeared on Fool.com and is written by Alex Bastardas.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!