Just how cheap are JPMorgan's shares?
A quick look at the 24 components of the KBW Bank Index (I:BKX) provides a pretty stark comparison.
JPMorgan's shares closed at $47.60 on Tuesday, trading for 8.2 times the consensus 2014 earnings estimate of $5.80 a share, among analysts polled by Thomson Reuters. Only two of the 24 components of the KBW Bank Index traded at lower multiples to the forward estimates, while nine of the names traded for more than 11 times forward earnings.Bank of America (BAC) is among the big banks trading at a higher multiple than JPMorgan, with shares closing at $11.13 Tuesday, or 8.6 times the consensus 2014 EPS estimate of $1.29. Bank of America is a recovery play. Eventually the company will finish working through its legacy mortgage mess, dramatically reducing expenses and unlocking capital, but it is unlikely to match JPMorgan's earnings performance over the next several years. Looking back, Bank of America's operating returns on average assets (ROA) have ranged from a negative 0.09% to a positive 0.26% over the past five years, according to Thomson Reuters Bank insight. Meanwhile, JPMorgan's ROA has risen steadily from 0.21% in 2007 to 0.94% in 2012. Among the component stocks of the KBW Bank Index, only two other names trade at less than 8.5 times consensus earnings estimates. Citigroup (C) closed at $41.29 Tuesday, trading for 7.9 times the consensus 2014 EPS estimate of $5.20. Capital One (COF) closed at $51.47, trading for 7.6 times the consensus 2014 EPS estimate of $6.73. Of course, one can easily argue that both Citi and Capital Ones are bargains, and the shares are being held back for different reasons. Citi is going through its own multiyear transition to right-size its balance sheet and rein-in expenses. Capital One had a disappointing fourth quarter , and its January credit card numbers showed a sharp decline in loan balances, which will be accelerated when the company completes the sale of its Best Buy (BBY) card portfolio to Citigroup.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV