Is JPMorgan Chase's Stock Overvalued Or Undervalued?

JPMorgan Chase & Co. JPM shares have outpaced the S&P 500 in 2021, generating a year-to-date total return of 31.4%.

JPMorgan is still putting up strong growth numbers, but with a $489-billion market cap, some investors are wondering if there’s any value left in JPMorgan stock.

Earnings: A price-to-earnings ratio (PE) is one of the most basic fundamental metrics for gauging a stock’s value. The lower the PE, the higher the value. For comparison, the S&P 500’s PE is currently at about 33.4, more than double its long-term average of 15.9.

JPMorgan’s PE is currently 11.1, less than a third of the S&P 500 average as a whole. JPMorgan's PE ratio is down 2.5% over the past five years, suggesting the stock is currently priced at the low end of its historical valuation range.

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Growth: Looking ahead to the next four quarters, the S&P 500’s forward PE ratio looks much more reasonable at just 20.3. JPMorgan’s forward earnings multiple of 10.3 is still about half the multiple of the S&P 500 as a whole, making JPMorgan stock look undervalued.

JPMorgan’s forward PE ratio is even significantly lower than its financial sector peers, which are currently averaging a 14 forward earnings multiple.

Yet when it comes to evaluating a stock, earnings aren't everything.

The growth rate is also critical for companies that are rapidly building their bottom lines. The price-to-earnings-to-growth ratio (PEG) is a good way to incorporate growth rates into the evaluation process. The S&P 500’s overall PEG is currently about 0.9; JPMorgan’s PEG is 1.35, suggesting JPMorgan is currently slightly overvalued after accounting for its impressive growth.

Price-to-sales ratio is another important valuation metric, particularly for unprofitable companies and growth stocks. The S&P 500’s PS ratio is currently 3.08, well above its long-term average of 1.62. JPMorgan’s PS ratio is 8.4, nearly triple the S&P 500.

Finally, Wall Street analysts see little value in JPMorgan stock over the next 12 months. The average analyst price target among the 23 analysts covering JPMorgan is $175, suggesting about 4.6% upside from current levels.

The Verdict: At its current price, JPMorgan stock appears to be slightly undervalued based on a sampling of common fundamental valuation metrics.

JPMorgan Chase CEO Jamie Dimon. Benzinga file photo by Dustin Blitchok.