What Do These Factors Say About JPMorgan Chase?

With shares of JPMorgan Chase (NYSE:JPM) trading around $56, is JPM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

JPMorgan Chase is a financial holding company that provides various financial services worldwide. The company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management, and private equity. Financial services companies like JPMorgan Chase are essential for well-functioning economies around the world. As companies continue to operate and economies expand, leaders like JPMorgan Chase will provide valuable products and services that help financial transactions run as smoothly as possible. As one of the better big banks, JPMorgan Chase will lead the financial sector for many years.

Recently, JPMorgan Chase reported earnings that exceeded expectations. The bank has also recently been accused by the U.S. Federal Energy Regulatory Commission of fixing energy prices in California and the Midwest between September 2010 and June 2011. Now, JPMorgan Chase is in the process of getting rid of its commodities business, a move that comes at a time when Congress is pushing for increased scrutiny of banks dealing in physical commodities. JPMorgan is searching for alternatives to the business.

T = Technicals on the Stock Chart are Strong

JPMorgan Chase stock has seen an explosive move higher in the last several months. The stock is trading near prices not seen since the early 2000s. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, JPMorgan Chase is trading above its rising key averages which signal neutral to bullish price action in the near-term.

JPM

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of JPMorgan Chase options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

JPMorgan Chase Options

20.64%

30%

28%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on JPMorgan Chase’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for JPMorgan Chase look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

32.23%

33.61%

54.89%

37.25%

Revenue Growth (Y-O-Y)

13.67%

-3.57%

10.16%

5.82%

Earnings Reaction

-0.30%

-0.60%

1.01%

-1.14%

JPMorgan Chase has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have expected a little more from JPMorgan Chase’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has JPMorgan Chase stock done relative to its peers, Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), and sector?

JPMorgan Chase

Bank of America

Citigroup

Wells Fargo

Sector

Year-to-Date Return

27.48%

27.30%

33.62%

29.55%

26.60%

JPMorgan Chase has been an average performer, year-to-date.

Conclusion

JPMorgan Chase is a financial giant that plays an integral role in the United States financial system. The company is reportedly looking to get rid of its commodities business and is searching for alternatives. The stock has been on a strong run and is now trading near prices not seen since the early 2000s. Over the last four quarters, earnings and revenue figures have been rising, however, investors in the company have expected a little more. Relative to its peers and sector, JPMorgan Chase has been an average performer. Look for JPMorgan Chase to OUTPERFORM.