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JPMorgan Chase & Co.
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== Valuation == === '''Comparable Company Analysis''' === Comparable company analysis derives metrics and ratios from financial statements and compare similar companies to determine the fair value of the company. The assumption for this is similar companies has similar valuation multiples, such as P/E ratio. {| class="wikitable" |+Information from Financial statements !Company !Share Price !Shares outstanding !Total debt !Minority Interest !Preferred stock !Total cash !Total Assets !Total liabilities !Total physical asset !Operating income !Depreciation & amortization !Net income !Preferred dividends !Weighted average number of common shares outstanding !Total shareholder's equity |- |JP Morgan Chase & Co. |125.58 |2.92B |563.3B |0 |27.4 |53.1B |3.67T |3.37T |35.52B |47.11B |7.051B |$37.49 |0 |2.92B |292.33B |- |Bank of America |32.46 |7.97B |508.91B |0 |28.4 |30.33B |3.05T |2.78T |21.27B |32.17B |1.978B |27.53 |1.51B |7.97B |273.2B |- |Citi Group |47.285 |1.95B |524.22B |0.089B |19 |47.55B |2.42T |2.22T |26.25B |19.3B |4.262B |$14.96 |1.03B |1.95B |201.19B |- |Goldman Sachs |333.71 |0.33245B |7.87B |0 |10.7 |7.87B |1.44T |1.32T |19.16B |14.06B |2.455B |11.26 |0.497B |0.33245B |117.19B |- |Wells Fargo |42.045 |3.75B |230.48B | -0.3B |19.45 |34.6B |1.9T |1.72T |17.98B |65.38B |6.832B |13.18 |1.12B |3.75B |179.89B |- |Morgan Stanley |86.52 |1.67B |329.33B |0.15B |8.75 |5.41B |1.18T |1.08T |4.07B |14.07B |3.998B |11.03 |0 |1.67B |100.14B |- |HSBC |40.47 |3.96B |300.28B |0.52B |0 |277.91B |2.47T |2.32T |8.62B |16.79B |3.873B |12.03 |0 |3.96B |139.44B |- |Barclays |7.665 |15.56B |185.84B |0.045B |0 |368.95B |1.51T |1.46T |3.61B |8.74B |1.786B |5.02 |0 |15.56B |55.01B |} Share price: the average price of the minimum and maximum stock price (52 weeks period) | B = Billions, T = Trillions Weighted average number of common shares outstanding: used the same value of shared outstanding for this because it is hard to find short term period(quarter) value for common shares outstanding {| class="wikitable" |+ !Company !Market Capitalization !Enterprise Value !Book value !Liquidation Value !EBIT !EBITDA !EPS !Market value per share !P/E !EV/EBIT !EV/EBITDA !Debt to Equity !Return on Equity |- |JP Morgan Chase & Co. |366.68B |904.28B |0.3T | -3.33448T |47.11B |54.161B |12.84 |125.58 |9.78 |19.20 |16.70 |11.53 |0.13 |- |Bank of America |258.71B |765.69B |0.27T | -2.75873T |32.17B |34.148B |3.45 |32.46 |9.40 |23.80 |22.42 |10.18 |0.10 |- |Citi Group |92.20575B |587.96475B |0.2T | -2.19375T |19.3B |23.562B |7.67 |47.29 |6.16 |30.46 |24.95 |11.034 |0.07 |- |Goldman Sachs |110.1243B |120.8243B |0.12T | -1.30084T |14.06B |16.515B |33.87 |333.71 |9.85 |8.59 |7.32 |11.26 |0.096 |- |Wells Fargo |157.66875B |372.69875B |0.18T | -1.70202T |65.38B |72.212B |3.51 |42.05 |11.96 |5.70 |5.16 |9.56 |0.073 |- |Morgan Stanley |144.4884B |477.3084B |0.1T | -1.07593T |14.07B |18.068B |6.60 |86.52 |13.10 |33.92 |26.42 |10.78 |0.110 |- |HSBC |160.2612B |183.1512B |0.15T | -2.31138T |16.79B |20.663B |3.04 |40.47 |13.32 |10.91 |8.86 |16.64 |0.086 |- |Barclays |119.2674B | -63.7976B |0.05T | -1.45639T |8.74B |10.526B |0.323 |7.67 |23.76 | -7.30 | -6.06 |26.54 |0.0912 |} === '''Dividend Discount Model''' === The current stock price is 142.37. Using the H model, a target price of 180.68 is obtained, giving a 21% upside difference after 5 years. This model gave assumptions of 15% initial high growth rate (g1), 3% terminal growth rate (g2) and a 7% discount rate. Advantages of using the H-model include: ==== 1. Consistency ==== One of the benefits of using the H-model is the fact that dividends remain steady over a long period. Usually, a company will experience fluctuation in certain measures, such as its total earnings and cash flow. However, it always tries to ensure that dividends are obtained from the cash flow that it expects to achieve every year. For that reason, most companies never set an unrealistically high dividend target because if they fail to achieve it, that can cause a fall in their share price.<ref name=":4">https://corporatefinanceinstitute.com/resources/valuation/h-model/</ref> ==== 2. No bias ==== The main unit of measurement used in the H-model is the dividend. The good thing about that is that the definition of a dividend payment is the same for every company. However, the same cannot be said for many other measures. For example, what makes up “total earnings” may differ from one company to another.<ref name=":4" /> ==== 3. Sign of maturity ==== The fact that shareholders continue to receive dividends year after year is an indication that the company has reached peak maturity. It shows that its operations are stable, and not much turbulence is likely to be experienced in the future. Thus, from an assessment point, it is much easier to calculate the discount rate since the model eliminates risk.<ref name=":4" /> <u>Other key assumptions made include:</u> ==== 1. Length of High-Growth Phase ==== The H model assumes a specific duration for the high-growth phase before transitioning to the stable growth phase. The duration of the high-growth phase should be determined based on the company's historical performance, future growth prospects, industry analysis, or management guidance. ==== 2. Transition to Stable Growth ==== The H model assumes a smooth transition from the high-growth phase to the stable growth phase. This implies that the company will experience a gradual slowdown in growth rates without any significant disruptions or sudden changes in its operations or competitive landscape. ==== 3. Dividend Stability ==== The H model assumes that the company will maintain a stable dividend pay-out policy during the stable growth phase. This assumes that the company has a consistent track record of paying dividends and is expected to continue doing so in the future. ==== 4. Stability of Growth Rates ==== The H model assumes that the growth rates (g1 and g2) remain constant during their respective phases. However, in reality, growth rates can vary due to changes in the company's operating environment, industry dynamics, or specific factors impacting its performance. It's important to acknowledge this assumption and consider any potential risks or uncertainties that could affect the stability of growth rates. ==== Sensitivity Analysis ==== A sensitivity analysis was conducted to determine the effect of the initial high growth rate, discount rate and terminal growth rate on the target value of the company. [[File:S1.png|S1.png]] [[File:S2.png|S2.png]]
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