Stock Analysis of JPMorgan Chase & Co (JPM)

JPMorgan Chase & Co (JPM)
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JPMorgan Chase & Co (JPM)
JPMorgan Chase & Co, which uses the trading symbol JPM at the New York Stock exchange Market, is one of the American Bank with its headquarters in New York City. JPMorgan Chase & Co is one of the big four banks in America, alongside Citi Bank, Well Fargo, and Bank of America. In terms of market capitalization, JPMorgan Chase & Co is the largest bank in the world based on the market capitalization of December 31, 2021. The company's assets are worth US$3.831 trillion. The company is renowned for investment banking, private wealth management, asset management, private banking, and treasury services. Historically, JPMorgan Chase & Co is an amalgamation of financial institutions; Bank One, J.P. Morgan & Co., Chemical Bank, and Chase Manhattan Bank. The original bank was founded in Delaware. Our study would try to establish how investable the firm is by considering the technical analysis, micro and macro environment analysis to justify our investment position.
Looking at the company's financial results, JPMorgan Chase & Co seems to be doing exceptionally well. The company posted a net income of $59,562 million in 2021 compared to $35,815 million in 2020, representing a 66.3 percent growth. The company as well posted a gross profit margin of 48.96 percent compared to the industry average of 39.09 percent. The net profit margin is well above the industry average at 39.7 percent compared to 31.01 percent (Investing.com, 2022). These profitability margins suggest a stellar performance that is expected to continue in 2022. Therefore, our outlook for the company forms a bullish trading bias because the company's financial indicators appear to be optimistic.
In addition, the company's efficiency ratios are impressive. The return on equity was at 18.2 percent, suggesting that the company was able to earn $18.2 for every $100 share value in comparison to the industry average of 12.74 percent (Investing.com, 2022). This performance indicates an above-average performance that is suitable for investment. Moreover, the return on assets was above the industry average. While the company posted a Return on Assets of 1.36 percent, the industry benchmark was at 1.08 percent (Investing.com, 2022). Consequently, JPMorgan Chase & Co is more efficient in the utilization of resources than other financial companies in the financial services industry. Its efficiency exudes confidence as a better investment opportunity.
However, the company's balance sheet reveals some worrying concerns. As of December 31, 2021, the balance sheet reveals an unhealthy balance sheet. JPMorgan Chase & Co's debt-to-equity ratio stood at 102.34 percent, implying that the long-term debt is slightly above the net worth of the company's common stock. 102.34 percent is as well way above the industry average of 88.73 percent (Investing.com, 2022). The debt to equity ratio shows the proportion of long-term debt against shareholder’s equity. The company is high leverage compared to the other financial companies in the industry. Furthermore, the company has a total debt-to-equity ratio of 186.63 percent. This ratio suggests that for every dollar share, there is a debt of $1.86. The industry benchmark is 165 percent. A high leverage company can sink the company into insolvency if not managed well. As much as debt as tax benefits, excessive debt may drive a company into financial distress. Although, according to Bloomberg (2022), JPMorgan Chase & Co.'s debt-assets ratio seems to be on a downward trend indicating that the high ratio may come down to a less alarming level in the foreseeable future. This historical evaluation still helps us maintain bullish biases regarding JPMorgan Chase & Co. stocks
The company's financial success is expected to be sustained in the coming years. So far, there have not been any significant changes in the company's top leadership. The composition of the Board management is still the same. James Dimon still is the Chairman of the Board and the sitting Chief Executive Officer (CEO) (WSJ, 2022). Additionally, there are no significant changes in other board members' membership. This intactness gives confidence that the company is not about to have a significant shift in investments strategies dispelling uncertainties brought about by significant changes in top leadership. As a resu...