BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION organ Chase & Co. operates as a financial services company worldwide. It operates through Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management segments. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 14.46 30.37 20.21 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 7.64 7.25 2.46 Net Income 7.09 14.91 6.83 EPS 11.39 19.65 8.79 BUY Sector: Financial Services Sub-Industry: Diversified Banks Source: S&P BUY RATING SINCE 01/23/2012 TARGET PRICE $137.18 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY TARGET PRICE $137.18 140 130 120 110 100 90 80 70 60 50 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 9.78 9.44 13.41 Q3 2016 8.56 8.92 11.79 Q3 2015 9.16 9.78 12.91 P/E COMPARISON Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History RECOMMENDATION We rate () a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, revenue growth, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company shows operating cash flow. 200 100 0 15.06 17.16 Ind Avg 25.45 S&P 500 HIGHLIGHTS Despite its growing revenue, the company underperformed as compared with the industry average of 10.4%. Since the same quarter one year prior, revenues slightly increased by 7.6%. Growth in the company's revenue appears to have helped boost the earnings per share. EPS ANALYSIS¹ ($) Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.37% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. Q1 1.45 Q2 1.54 Q3 1.68 2015 Q4 1.32 Q1 1.35 Q2 1.55 Q3 1.58 2016 NA = not available NM = not meaningful Q4 1.71 Q1 1.65 Q2 1.82 Q3 1.76 2017 1 Compustat fiscal year convention is used for all fundamental data items. has improved earnings per share by 11.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ORGAN CHASE & CO increased its bottom line by earning $6.19 versus $5.99 in the prior year. This year, the market expects an improvement in earnings ($6.93 versus $6.19). The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500. The gross profit margin for is currently very high, coming in at 81.72%. Regardless of 's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 23.04% trails the industry average. PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) 0% 22.5% RY BMO UNFAVORABLE BNS 30% BAC C EBITDA Margin (TTM) HDB USB WFC FAVORABLE MTU 90% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $50 Billion and $371 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) 0% 22.5% UNFAVORABLE 2% HDB Earnings Yield (TTM) BAC USB WFC C FAVORABLE TD RY BMO BNS MTU 11% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between 1% and 20.5%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS Commercial Banking is a highly fragmented industry. We rate more than 300 publicly traded institutions, ranging from huge Wells Fargo (WFC) to tiny companies such as United Bancshares (UBSI). They compete in a broad market of over 9,000 commercial banks and savings institutions, insured by the Federal Deposit Insurance Corporation institutions. Historically, commercial banks made most of their profits by capturing the margin between interest paid to depositors and higher rates charged to borrowers. They also raise money by selling bonds and bundles of loans called asset-backed securities. Additional income is earned from deposit and loan fees, as well as securities underwriting, stock trading, and asset management. The banking industry set record profits in previous years before collapsing as real estate prices imploded. This resulted in asset-backed securities being impossible to mark-to-market when the market dried up and diminishing the apparent equity capital position of the banks. The industry was rescued by the U.S. government through direct injections of capital to more than 700 financial institutions under the Troubled Asset Relief Program, or TARP. In the financial crisis, 222 firms failed and were closed by the FDIC. In December 2009, 702 banks, accounting for $402.8 billion in total assets, were on the FDIC s problem bank list and risk being liquidated and sold to er banks. Legislation to strengthen financial industry regulation has been put in place to protect consumers from the worst practices of the credit card banks. Additional reforms designed to protect the industry from institutions from taking on excess leverage are being put in place to reduce systemic risk, regulate derivative financial products, and liquidate financial institutions formerly believed to be too-big-to-fail without a tax-payer bailout. The recovering economy and the new financial reforms serve to return confidence to the commercial banking group. PEER GROUP: Commercial Banks Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 104.52 370,964 15.06 111,224.00 26,936.00 USB U S BANCORP 55.15 95,334 16.36 23,620.00 6,014.00 HDB HDFC BANK LTD 97.10 83,767 33.48 13,855.73 2,484.75 BNS BANK OF NOVA SCOTIA 63.25 75,851 9.75 36,186.00 8,005.00 BMO BANK OF MONTREAL 77.01 49,955 9.47 26,838.00 5,465.00 BAC BANK OF AMERICA CORP 28.17 309,242 16.10 97,994.00 20,408.00 WFC WELLS FARGO & CO 56.47 294,802 14.59 96,082.00 21,137.00 C CITIGROUP INC 75.50 208,651 14.55 85,865.00 15,668.00 RY ROYAL BANK OF CANADA 78.30 114,528 10.37 50,098.00 11,428.00 TD TORONTO DOMINION BANK 56.94 105,259 10.33 42,888.00 10,396.00 MTU MITSUBISHI UFJ FINANCIAL GRP 7.13 101,024 10.64 52,160.39 9,034.81 The peer group comparison is based on Major Diversified Banks companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION organ Chase & Co. operates as a financial services company worldwide. It operates through Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management segments. The Consumer & Community Banking segment offers deposit and investment products and services to consumers; lending, deposit, and cash management and payment solutions to small businesses; residential mortgages and home equity loans; and credit cards, payment services, payment processing services, auto loans and leases, and student loans. The Corporate & Investment Bank segment provides investment banking products and services, including advising on corporate strategy and structure, and capital-raising in equity and debt markets, as well as loan origination and syndication; treasury services, such as cash management and liquidity solutions; and cash securities and derivative instruments, risk management solutions, prime brokerage, and research services. It also offers securities services, including custody, fund accounting and administration, and securities lending products for asset managers, insurance companies, and public and private investment funds. The Commercial Banking segment offers financial solutions, including lending, treasury, investment banking, and asset management to corporations, municipalities, financial institutions, and nonprofit entities, as well as financing to real estate investors and owners. The Asset & Wealth Management segment provides investment and wealth management services across various asset classes, such as equities, fixed income, alternatives, and money market funds; multi-asset investment management services; retirement services; and brokerage and banking services comprising trusts, estates, loans, mortgages, and deposits. organ Chase & Co. was founded in 1799 and is headquartered in New York, New York. 270 Park Avenue New York, NY 10017 USA Phone: 212-270-6000 http://www.jpmorganchase.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 3.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 50% of the stocks we rate. Total Return 4.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. Efficiency 3.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 60% of the companies we review. Price volatility 5.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 90% of the stocks we monitor. Solvency 5.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 90% of the companies we analyze. Income 4.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 70% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 has decreased when compared to the same period a year ago. The company has grown sales and net income during the past quarter when compared with the same quarter a year ago, however, it was unable to keep up with the growth of the average competitor within its industry. At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by 1.59% from the same quarter last year. 1.70 Q4 FY17 6.93 E 2017(E) 7.62 E 2018(E) STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. INCOME STATEMENT Net Sales ($mil) 29,215.00 27,140.00 EBITDA ($mil) 15,298.00 14,834.00 EBIT ($mil) 13,719.00 13,427.00 Net Income ($mil) 6,732.00 6,286.00 BALANCE SHEET Cash & Equiv. ($mil) 643,258.00 650,227.00 Total Assets ($mil) 2,563,074.00 2,521,029.00 Total Debt ($mil) 511,942.00 514,646.00 Equity ($mil) 258,382.00 254,331.00 PROFITABILITY Gross Profit Margin 81.72% 86.23% EBITDA Margin 52.36% 54.65% Operating Margin 46.96% 49.47% Sales Turnover 0.04 0.04 Return on Assets 1.05% 0.92% Return on Equity 9.78% 8.56% DEBT Current Ratio NA NA Debt/Capital 0.66 0.67 Interest Expense NA NA Interest Coverage NA NA SHARE DATA Shares outstanding (mil) 3,470 3,578 Div / share 0.50 0.48 EPS 1.76 1.58 Book value / share 74.47 71.08 Institutional Own % NA NA Avg Daily Volume 12,157,299 13,031,598 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 1/23/2012. As of 11/30/2017, the stock was trading at a price of which is 2.0% below its 52-week high of $106.66 and 31.1% above its 52-week low of $79.70. VALUATION BUY. This stock's P/E ratio indicates a discount compared to an average of 17.16 for the Commercial Banks industry and a significant discount compared to the S&P 500 average of 25.45. To use another comparison, its price-to-book ratio of 1.40 indicates a significant discount versus the S&P 500 average of 3.24 and a premium versus the industry average of 1.34. The current price-to-sales ratio is well above the S&P 500 average and above the industry average, indicating a premium. 2 Year Chart BUY: $66.68 2016 $125 $100 $75 MOST RECENT RATINGS CHANGES Date Price Action From To 11/30/15 $66.68 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/30/2017) 44.19% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.85% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 24.96% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. Price/Earnings 15.06 Peers 17.16 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. is trading at a discount to its peers. Price/Projected Earnings 13.72 Peers 14.84 Average. An average price-to-projected earnings ratio can signify an industry neutral stock price and average future growth expectations. is trading at a valuation on par with its peers. Price/Book 1.40 Peers 1.34 Average. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a valuation on par with its peers. Price/Sales 3.26 Peers 3.10 Average. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a valuation on par with its industry on this measurement. Price/CashFlow 16.65 Peers 15.80 Average. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a valuation on par to its peers. Price to Earnings/Growth 1.26 Peers 1.00 Premium. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant premium to its peers. Earnings Growth lower higher 19.65 Peers 27.76 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 7.25 Peers 4.15 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that significantly exceeds its peers. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 DISCLAIMER: The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5