Your very rich uncle gave you some money and you want to buy stocks. A friend told you that JPMorgan Chase (JPM) might be a good investment. To make sure you are using our money wisely, you want to perform a simple analysis. 1. Find the PE Ratios (TTM) for JPM's competitors. You selected as competitors the following companies Bank of America (BAC) Citigroup (C) Wells Fargo (WFC) Goldman Sachs (GS) Morgan Stanley (MS) To find the PE ratios, you can use Yahoo Finance. TTM means Trailing Twelve Months, and PE ratio (TTM) is found using the EPS for the last 12 months. Copy and paste the screen, so I can see where your numbers come from. 2. Compute the arithmetic average of all 5 PE ratios. 3. Using the average PE ratio and JPM' earnings per share (EPS), you can estimate the tock price for JPM. Is the computed price higher or lower than the real market price? Is the stock undervalued or overvalued? 4. Looking back at your analysis, what adjustments would you make? In other words, is there anything that you would change and why? 5. Now, repeat steps 1 to 2 using the forward PE ratios. The forward PE ratio uses analysts' estimates of the earnings per share in the next 12 months. 6. What is JPM's estimated stock price using the forward PE ratios? Is this a better estimate than the one found in step 3? Explain why. Ratios: Bank of America (BAC) PE 11.67 EPS 2.03 Citigroup (C) PE 8.07 EPS 5.14 Wells Fargo (WFC) PE 56.30 EPS 0.38 Goldman Sachs (GS) PE 10.48 EPS 18.04 Morgan Stanley (MS) PE 8.14 EPS 5.92 Your very rich uncle gave you some money and you want to buy stocks. A friend told you that JPMorgan Chase (JPM) might be a good investment. To make sure you are using our money wisely, you want to perform a simple analysis. 1. Find the PE Ratios (TTM) for JPM's competitors. You selected as competitors the following companies Bank of America (BAC) Citigroup (C) Wells Fargo (WFC) Goldman Sachs (GS) Morgan Stanley (MS) To find the PE ratios, you can use Yahoo Finance. TTM means Trailing Twelve Months, and PE ratio (TTM) is found using the EPS for the last 12 months. Copy and paste the screen, so I can see where your numbers come from. 2. Compute the arithmetic average of all 5 PE ratios. 3. Using the average PE ratio and JPM' earnings per share (EPS), you can estimate the tock price for JPM. Is the computed price higher or lower than the real market price? Is the stock undervalued or overvalued? 4. Looking back at your analysis, what adjustments would you make? In other words, is there anything that you would change and why? 5. Now, repeat steps 1 to 2 using the forward PE ratios. The forward PE ratio uses analysts' estimates of the earnings per share in the next 12 months. 6. What is JPM's estimated stock price using the forward PE ratios? Is this a better estimate than the one found in step 3? Explain why. Ratios: Bank of America (BAC) PE 11.67 EPS 2.03 Citigroup (C) PE 8.07 EPS 5.14 Wells Fargo (WFC) PE 56.30 EPS 0.38 Goldman Sachs (GS) PE 10.48 EPS 18.04 Morgan Stanley (MS) PE 8.14 EPS 5.92
