Financial Sector
Company Presentation, Fall 2010
Jason Isaacs, David Wilkes,
Kevin Neebes & Yuange Yang
Financial
Sector
Table of Contents
Section
Section Name
Slide No
1.
Financial Sector Performance
3
2.
Hudson City Bancorp
4
3.
Lazard LTD
11
4.
Goldman Sachs
19
5.
Lincoln National
26
6.
Well’s Fargo
34
7.
J.P. Morgan
34
Financial
Sector
Financial Sector Performance
Sector
Last 12 months
Last 3 months
Last 1 month
S&P500 (SPX)
8.4%
11.6%
6.1%
Energy (XOM.S)
6.7%
14.2%
6.7%
Material (DD.S)
13.9%
19.5%
5.8%
Industrials (GE.S)
20.0%
14.5%
7.2%
Consumer Discretionary (TGT.S)
24.7%
13.9%
7.5%
Consumer Staples (PG.S)
10.9%
9.8%
3.9%
Healthcare (MRK.S)
7.8%
9.2%
6.5%
Financials (JPM.S)
1.5%
6.1%
3.1%
Information Technology (MSFT.S)
12.7%
11.7%
9.1%
Telecom (VZ.S)
15.0%
19.7%
7.1%
Utilities (EXC.S)
9.7%
12.2%
1.0%
The Financial Sector has
lagged in performance
compared to the S&P 500
Financial
Sector
Financials
•Market Cap: $4,157 B
•SIM Weight: 11.83%
•S&P Weight: 15.57%
•Underweight: -3.74%
Hudson City Bancorp (HCBK)
Financial
Sector
Hudson City Bancorp
•Vital Statistics:
•Stock Price:
•Beta:
•52 week:
•Market Cap:
•Industry:
•Analyst 1 yr target
$11.48
0.59
$11.35-$14.75
Hudson City Savings Bank was founded 1868
$6.05B
Thrifts & Mortgage Companies
$12.05 or 4.7% upside
•Products & Services:
•Deposit Products (DDA/SAV/CD/IRA)
•Fixed and Variable Rate Mortgage Loans
•Home Equity Lines of Credit (HELOC’s)
•SIM Holding:
•3.57% of Portfolio
•Second to Worst Yield for October at (5.06%)
Financial
Sector
131 locations in NY, NJ, CT, and the
Philadelphia metropolitan area.
Hudson City Bancorp
Hudson City Bancorp. (HCBK)
9% Hurdle Rate
3% Terminal FCF Growth
Analyst: Jason Isaacs
10/19/2010
All dollars are in $1,000's unless otherwise noted
Year
Revenue
2010E
3,094.4
2011E
2012E
3,218.2
% Growth
3,346.9
4.0%
Operating Income
910
Operating Margin
29.4%
Taxes
361
Tax Rate
Net Income
% Growth
549
% Growth
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
3,931
4,679
8,610
941
349
593
4,101
1,025
594
0.00002
2018E
4,225
920
410
4,268
1,014
341
1.0%
1,024
24.0%
375
37.0%
580
2020E
1.0%
22.0%
37.0%
698
2019E
2.0%
27.0%
37.0%
646
$
DCF Price Target
$11.93
4,183
1,107
379
11.93
4.0%
26.0%
37.0%
$
2017E
4.5%
25.0%
37.0%
614
2016E
3,944
943
348
37.0%
Current Price
Implied equity
value/share
4.3%
26.0%
361
596
3,774
4.0%
28.0%
37.0%
572
2015E
3,620
975
392
37.0%
3.0%
2014E
4.0%
29.5%
376
549
Free Cash Flow
987
29.5%
37.0%
3,481
9.0%
Terminal FCF Growth =
2013E
4.0%
948
Terminal Discount Rate =
24.0%
379
37.0%
639
37.0%
645
4.2%
4.1%
3.1%
-3.4%
0.2%
8.7%
8.0%
-16.9%
10.2%
572
596
614
593
594
646
698
580
639
645
4.2%
4.1%
3.1%
-3.4%
0.2%
8.7%
8.0%
-16.9%
10.2%
1.0%
Terminal Value
11,077
Free Cash Yield
5.83%
46%
54%
100%
0.00%
1.0%
Terminal P/E
Terminal EV/EBITDA
Price Target Estimation
Absolute
Valuation
A.
High
B.
Low
C.
Media
n
Current
D.
#Your
Target
Multipl
e
*Your
Target
E, S, B,
etc/Sha
re
Your
Target
Price
(F x G)
F.
G.
H.
E.
P/Forward
E
31.6
9.8
19.6
12.2
13
1.10
$14.30
P/EBITDA
15.46
2.75
9.97
2.75
9.97
1.10
$10.97
P/CF
33.5
9.4
24.1
9.6
10
1.10
$11.00
Financial
Sector
$11.93 + $14.30 + $10.97 + $11
4
17.2
10.7
= $12.05 / share
price target
Hudson City Bancorp
Fundamental Analysis
HCBK v.
the S&P
500 Index
P/Trailing E
P/Forward
E
P/B
P/S
P/CF
High
Low
Median
Current
2.0
1.7
0.64
0.66
1.5
1.3
0.71
0.87
1.8
14.0
2.9
0.3
3.6
1.0
0.7
9.0
2.3
HCBK v.
Industry
P/Trailing E
P/Forward
E
P/B
P/S
P/CF
High
Low
2.9
2.4
19.5
33.4
6.6
Financial
Sector
HCBK v.
Sector
High
Low
Median
Current
P/Trailing E 2.6
P/Forward E 2.0
0.1
0.6
1.9
1.5
0.8
1.1
0.5
3.6
1.0
P/B
P/S
P/CF
2.8
11.8
2.9
0.7
3.2
1.0
1.1
5.3
2.3
1.0
3.2
1.0
Median
Current
HCBK
High
Low
Median
Current
0.65
0.26
2.2
0.93
0.68
0.79
P/Trailing E 30.5
P/Forward E 24.2
10.8
9.8
25.3
19.3
11.0
12.7
0.7
1.0
0.1
1.1
3.5
0.7
1.1
1.0
0.7
P/B
P/S
P/CF
1.1
4.4
9.4
1.5
12.5
23.3
1.1
4.4
9.6
5.1
15.7
30.8
Hudson City Bancorp
•Business Analysis:
• Dodd-Frank Wall Street Reform & Consumer Protection Act (2010)
• Office of Thrift Supervision (OTS) abolished
• FDIC institutes Transaction Account Guarantee Program (TAGP) indefinitely
•There is talk of abolishing OCC Regulation Q
• New Consumer Protection Agency will require ―plain vanilla‖ products
• Basel III
• New capital adequacy requirements
• Phased global deadline beginning in 2012 through 2019
• Macroeconomic
• Unemployment will hinder new mortgage applications
• Housing starts & consumer confidence indices
Financial
Sector
Hudson City Bancorp
SIM Portfolio acquired HCBK following Spring Quarter 2010
“Catching a falling knife”
Financial
Sector
Recommendation: Hudson City Bancorp
SELL:
•Sell shares (entire position)
Financial
Sector
Lazard LTD. (LAZ)
Financial
Sector
Lazard Limited
History:
•
•
•
•
Formerly known as Lazard Frères & Co.
Origins in 1848, New Orleans, LA
Privately held until May 5, 2005 IPO
(NYSE: LAZ)
In 2009, its famed CEO and Chairman
Bruce Wasserstein passed away
Industry: Investment Banking &
Brokerage
Two main business lines:
1. Financial Advisory
•
M&A, financing, restructuring
•
Corporations, partnerships, institutions,
governments, and individuals
2. Asset Management
The late Bruce Wasserstein
US Headquarters at 30 Rockefeller
Center, New York City, NY
Financial
Sector
Key Financial Statistics
Price Related Information
Current Stock Price – $36.68
52-Week High – $41.25
52-Week Low – $25.70
Trailing P/E Ratio – 43.6
Dividend Yield – 1.35
Analyst Recommendations
Insider Trading – Last 3 mo.
Buys Less Sales: (2-4) = -2
Buy – 9
Hold – 4
Sell – 0
Price Targets (9/13):
High – $44.00
Low – $37.00
Average – $41.67
Source: Bloomberg Terminal (analyst recommendations)
Financial
Sector
Discounted Cash Flow Model
NPV of CF
2,559,046
56.6%
Terminal
Discount
Rate =
12.0%
Current Price
(11/22/2010) $
36.68
NPV of
Terminal
1,965,423
43.4%
Terminal FCF Growth
=
3.0%
Implied equity value
/share
$
40.79
4,524,470
100.0%
Upside/ (Downside) to
DCF
11.2%
0
1
2
3
4
5
6
7
8
9
10
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
1,850,551
2,072,617
2,259,153
2,338,223
2,420,061
2,498,713
2,579,921 2,657,319 2,737,039
2,819,150
2,903,724
12.0%
9.0%
3.5%
3.5%
3.3%
3.3%
3.0%
3.0%
3.0%
3.0%
Projected
(dollars in thousands, except for per share data) Equity Value
Year
Revenue
% Growth
Operating Income
314,257
481,751
550,265
503,361
520,979
537,911
555,393
572,055
589,216
606,893
625,100
Operating Margin
17.0%
23.2%
24.4%
21.5%
21.5%
21.5%
21.5%
21.5%
21.5%
21.5%
21.5%
Interest Income, Net
38,528
59,063
67,462
61,712
58,081
54,972
51,598
47,832
43,793
39,468
34,845
2.1%
2.8%
3.0%
2.6%
2.4%
2.2%
2.0%
1.8%
1.6%
1.4%
1.2%
60,265
92,386
105,525
108,365
111,047
113,698
116,403
118,876
121,393
123,953
126,558
19.2%
19.2%
19.2%
19.2%
19.2%
19.2%
19.2%
19.2%
19.2%
19.2%
19.2%
225,240
345,289
394,396
456,709
468,013
479,185
490,588
501,010
511,616
522,408
533,386
53.3%
14.2%
15.8%
2.5%
2.4%
2.4%
2.1%
2.1%
2.1%
2.1%
Interest % of Sales
Taxes
Effective Tax Rate
Net Income / Free Cash Flow Proxy
% Growth
Financial
Sector
Fundamental Analysis
Absolute Basis
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
51.5
21.8
50.4
1.8
99.0
Relative to
Sector
P/Trailing E
P/Forward E
P/B
P/S
P/CF
Date: 11/21/10
Low
13.1
12.1
2.1
0.6
8.0
Median
21.1
16.3
7.9
1.0
16.9
Current
43.6
15.8
8.8
1.8
9.3
High
Low
Median
Current
3.1
1.7
37.9
1.4
10.5
0.3
0.9
1.0
0.3
0.1
1.6
1.2
8.0
0.6
1.1
3.0
1.4
7.9
1.3
0.9
Relative to Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
5.3
1.9
37.4
1.1
12.5
Low
0.25
0.19
1.1
0.3
0.7
Median
1.8
1.4
6.6
0.5
1.7
Current
4.1
1.5
7.2
1.0
1.1
Relative to SP500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
3.1
1.5
19.7
1.7
11.7
Low
0.85
0.85
0.7
0.4
0.9
Median
1.3
1.1
3.9
0.8
1.7
Current
3.0
1.2
4.0
1.5
1.0
Overall Trend: Lazard has become expensive!
Financial
Sector
Price Target
Absolute
Valuation
A.
P/Forward E
P/S
P/B
P/EBITDA
P/CF
Average
High
Low
B.
C.
21.8
1.8
50.4
44.79
99.0
12.1
0.6
2.1
3.32
8.0
Median
D.
16.3
1.0
7.9
7.92
16.9
Current
E.
15.8
1.8
8.8
32.72
9.3
#Your Target
Multiple
*Your Target
E, S, B, /Share
F.
16.05
1.8
8.35
32.72
13.1
G.
1.88
16.57
4.17
1.12
3.94
Your Target
Price (F x G)
H.
$30.17
$29.83
$34.82
$36.68
$51.67
$37.09*
* P/B ratio not included in average calculation given its difficulty of accurate value in financial sector
Final Price Target = $38.94
(50% DCF + 50% Multiple)
• With final target price of $38.94, on par with the mean estimates by analysts
• However, only a 6.16% upside available
Financial
Sector
Opportunities & Risks
Opportunities:
•Assimilation of new senior management hires could increase client
exposure
•Double dip could add continued success to Lazard’s restructuring
business
•Global nature of the firm bodes well for BRIC asset management
opportunities
Risks:
•Dodd Frank regulation could cause bulge bracket encroachment
into Lazard’s traditional investment banking strategy
•Improved economic conditions could cause a client flight to larger
institutions due to ending concern of balance sheet issues
•Large cash position could cause shareholders to question balance
sheet efficiency in terms of maximizing stakeholder returns
Financial
Sector
Recommendation: Lazard LTD
SELL:
•Sell 18,300 shares (entire position)
•Proceeds could cancel out losses on HCBK investment
•Limited upside for the stock, even on high analyst estimates
Financial
Sector
Goldman Sachs (GS)
Financial
Sector
Goldman Sachs
•Vital Statistics:
•Stock Price:
$160
•Beta:
1.56
•52 week:
$129.50-$186.41
•Market Cap:
$82.51B
•Industry:
Investment Banking and Brokerage
•Analyst 1 yr target
$191: upside = 19%
•On September 30, 2010:
$144.58
•Segments:
Q3 Revenues
•Investment Banking
$1.12 B
•Trading and Principal Investments
$6.38 B
•Asset Management and Securities Services
$1.4 B
•SIM Holding:
•4.86% of Portfolio
•Top 5 Performer for October—11.45%
Financial
Sector
Goldman Sachs 1 Year Price Action
Financial
Sector
Goldman Sachs
(in millions of $)
Year
Current Price
$ 160.00
13.0%
Implied equity value/share
$ 192.05
Terminal FCF
Growth =
2.0%
Upside/(Downside) to DCF
20%
Terminal
Discount Rate
=
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Revenue
% Growth
38,865
42,382
9.1%
45,278
6.8%
47,995
6.0%
50,395
5.0%
52,662
4.5%
54,769
4.0%
56,686
3.5%
58,386
3.0%
59,846
2.5%
61,043
2.0%
Operating Income
Operating Margin
13,424
34.5%
15,003
35.4%
16,107
35.6%
16,798
35.0%
17,134
34.0%
17,379
33.0%
18,074
33.0%
18,706
33.0%
19,268
33.0%
19,749
33.0%
20,144
33.0%
Interest Income
Interest % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Taxes
Tax Rate
4,430
33.0%
4,951
33.0%
5,315
33.0%
5,543
33.0%
5,654
33.0%
5,735
33.0%
5,964
33.0%
6,173
33.0%
6,358
33.0%
6,517
33.0%
6,648
33.0%
Net Income
% Growth
8,605
9,628
11.9%
10,339
7.4%
11,255
8.9%
11,480
2.0%
11,644
1.4%
12,109
4.0%
12,533
3.5%
12,909
3.0%
13,232
2.5%
13,497
2.0%
Financial
Sector
Goldman Sachs
Fundamental Evaluation
Relative to Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.2
1.1
1.5
1.3
1.8
.13
.13
.8
.3
.2
.96
.92
1.0
.6
1.1
.92
.80
1.1
1.3
.9
Relative to S&P 500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
2.1
1.4
1.0
1.7
1.7
.37
.51
.4
.5
.5
.70
.72
.7
1.0
1.1
.53
.64
.6
1.7
.7
Absolute Valuation
P/Forward E
P/S
P/B
P/EBITDA
P/CF
Financial
Sector
High
Low
21.5
2.2
4.4
19.39
17.2
Median
7.5
.4
.7
1.69
3.9
11.7
1.4
2.1
7.68
11.5
Current
9.5
2.1
0
4.93
7.4
Goldman Sachs
•Business Analysis:
•New Rules:
•Dodd-Frank and Basel III
•Limit use of Debt
•Increase Capital Requirements
•QE2, Inflation and Uncertainty
•Challenges and Opportunities:
•Risks:
•Proprietary Trading
•Earnings are Slowing Down
•Opportunities:
•GS is a ―Money Machine‖ – Fortune Magazine
•Excellent prospects in Asia—Trading and Ibanking
•New Regulations might cause Banks to leave lucrative
business to GS.
•Has the Market overreacted and undervalued GS?
Financial
Sector
Goldman Sachs
Method
DCF
P/FE
P/B
P/EBITDA
P/CF
Total
Price Target
$
192.05
$
195.39
$
269.50
$
166.00
$
191.25
Weight
45%
20%
5%
15%
15%
Price Target
Average
$
86.42
$
39.08
$
13.48
$
24.90
$
28.69
$
192.56
Recommendation:
•Hold – 20% upside potential
Financial
Sector
Lincoln National Corp (LNC)
Financial
Sector
Key Statistics
•P/E Ratio:
7.6
•Current Price: $23.64
•52 Week High: $33.55
•52 Week Low: $20.65
•Dividend Yield: $.20/0.80%
•Market Cap:
$7.49B
•Enterprise Value: $7.56B
Analysts Recommendations
•Buy:
6
•Outperform: 3
•Hold:
9
•Underperform: 0
•Sell:
0
Financial
Sector
•Number of Analysts:15
•High Target Price: $41.00
•Mean Target Price: $31.38
•Low Target Price: $27.00
Overview of Company
•Lincoln National (Holding Company) – Life Insurance
•Headquartered in Radnor, Pennsylvania
•Operations by segment:
Net Income Breakdown
Revenue Breakdown
18%
26%
Retirement Solutions
Defined Contribution
10%
46%
Financial
Sector
6%
Retirement Solutions
Annuities
41%
39%
Retirement Solutions
Annuities
Retirement Solutions
Defined Contribution
Insurance Solutions
Life Insurance
Insurance Solutions
Life Insurance
Insurance Solutions
Group Protection
Insurance Solutions
Group Protection
14%
Note: Figures from 2010 YTD
DCF Model
Lincoln National Corporation (LNF)
Analyst: Yuange Yang
11/21/2010
(000s)
Year
Terminal Discount Rate =
Terminal FCF Growth =
2010E
Revenue
9,946
% Growth
2011E
10,304
3.6%
Operating Income
Operating Margin
Taxes
Tax Rate
Net Income
1,144
11.5%
1,607
15.6%
% of Sales
Capex % of sales
Free Cash Flow
% Growth
1,641
15.0%
11,267
3.0%
1,690
15.0%
11,605
3.0%
1,741
15.0%
11,953
3.0%
1,793
15.0%
2017E
12,312
3.0%
1,847
15.0%
2018E
12,681
3.0%
1,902
15.0%
2019E
13,061
3.0%
1,959
15.0%
2020E
13,453
3.0%
2,018
15.0%
506
459
473
487
502
517
533
549
565
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
830
1,160
0
0
0
0.0%
830
0
0.0%
0
0.0%
0
0.0%
1,160
39.8%
Financial
Sector
17.0%
3.0%
2016E
450
0.0%
Subtract Cap Ex
1,805
10,939
2015E
28.0%
0.0%
Plus/(minus) Changes WC
3.1%
2014E
24.52
35.67
41.0%
309
39.8%
% of Sales
10,620
2013E
$
$
27.0%
% Growth
Add Depreciation/Amort
2012E
Current Price
Implied equity value/share
Upside/(Downside) to DCF
13.0%
3.0%
1,299
12.0%
0
0.0%
0
0.0%
0
0.0%
1,299
12.0%
1,181
-9.0%
0
0.0%
0
0.0%
0
0.0%
1,181
-9.0%
1,217
3.0%
0
0.0%
0
0.0%
0
0.0%
1,217
3.0%
1,253
3.0%
0
0.0%
0
0.0%
0
0.0%
1,253
3.0%
1,291
3.0%
0
0.0%
0
0.0%
0
0.0%
1,291
3.0%
1,330
3.0%
0
0.0%
0
0.0%
0
0.0%
1,330
3.0%
1,370
3.0%
0
0.0%
0
0.0%
0
0.0%
1,370
3.0%
1,411
3.0%
0
0.0%
0
0.0%
0
0.0%
1,411
3.0%
1,453
3.0%
0
0.0%
0
0.0%
0
0.0%
1,453
3.0%
Relative Valuation
Relative to Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
16.9
13.9
2.2
1.9
14.2
Low
2.0
1.8
.2
.2
2.4
Median
12.2
11.3
1.3
1.4
10.1
Current
7.6
7.2
.7
.9
7.3
Relative to S&P 500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
.86
.83
.6
1.3
1.3
Low
.17
.14
.2
.2
.3
Median
.65
.62
.5
1.0
.9
Current
.49
.53
.3
.7
.8
•On a relative basis to the industry and to the S&P 500, its trailing P/E,
P/Forward E, P/B, P/S, and P/CF are all trailing its median values compared
to life insurance companies and the market (i.e. relatively cheaper)
Financial
Sector
Price Target
Absolute
Valuation
High
Low
Median
A.
P/Forward E
P/S
P/B
P/EBITDA
P/CF
Average
B.
13.9
1.9
2.2
35.51
14.2
C.
1.8
.2
.2
1.66
2.4
D.
11.3
1.4
1.3
7.20
10.1
Current
#Your Target
Multiple
E.
7.2
.9
.7
4.98
7.3
*Your Target
E, S, B, /Share
Your Target
Price (F x G)
G.
H.
F.
9
.95
.1
6
9
3.45
32.78
25.61
5.12
3.20
31.05
31.14
25.61
30.72
28.8
30.43
Final Price Target = $32.00
(30% DCF + 70% Multiple)
•The price targets are based on conservative measures for multiples
•Ignore P/B ratio, since book ratio not accurate for financial sector
•With final target price of $32.00, on par with the mean estimates by analysts
Financial
Sector
Opportunities and Risks
•Opportunities:
•Aging demographics is opportunity for most profitable segment: annuities
•Management shift focus to lock in high-yielding assets to hedge future
cash flow and organic growth
•Strengthening balance sheet, and exposure to quality credit
•Risks:
•Low interest rate interest rate environment means lower reinvestment of
insurance premiums and thinner interest margins
•New regulation in financial services affecting the value of assets
•Continued unemployment results in companies/individuals inability to
afford insurance
Financial
Sector
Recommendation: Lincoln National
Recommendation:
•Insurance has been the strongest perform in financial industry
•Continued dominance in sector
•Buy 233 Basis Points – flexibility to add more or trim
Financial
Sector
Wells Fargo And Company (WFC)
Financial
Sector
Wells Fargo And Company (WFC)
•―What Three Bullish Billionaires Are Buying‖ – WSJ November 22, 2010.
•Vital Statistics:
•Stock Price:
•52 week low:
•52 week high:
•1 yr. Target:
•Upside Potential:
•Market Cap:
•Enterprise Value:
•ROE:
$26.95
$23.02
$34.25
$35.47
31.6%
$141.45 B
$238.7 B
11%
Analyst Expectations:
•Strong Buy:
•Buy:
•Hold:
•Underperform:
•Sell:
•Information from Thomson/First Call
•Segments:
•Retail, commercial and corporate banking services principally in the US.
•Community Banking
•Wholesale Banking
•Wealth, Brokerage and Retirement
Financial
Sector
9
13
6
2
1
Wells Fargo And Company (WFC)
Relative to
Sector
P/Trailing E
High
Low
Median
Current
High
Low
Median
Current
.9
Relative to
S&P 500
P/Trailing E
1.3
.1
1.1
1.2
.58
.82
.93
P/Forward E
1.4
.7
1.1
.9
P/Forward E
1.6
.56
.81
.79
P/B
3.1
.9
1.3
1.2
P/B
1.3
.5
.9
.6
P/S
2.4
1.0
1.4
1.2
P/S
3.4
1.2
2.3
1.4
P/CF
1.4
.1
1.0
1.1
P/CF
1.7
.6
.9
1.2
Relative to
Industry
P/Trailing E
High
Low
Median
Current
1.5
.16
1.1
.94
P/Forward E
1.2
.71
1.1
.94
P/B
2.0
.8
1.3
.9
P/S
1.4
.8
1.0
.9
P/CF
1.3
.4
1.0
.9
Absolute
Valuation
High
Low
Median
Current
P/Forward E
P/S
P/B
P/EBITDA
P/CF
24.1
5.4
3.7
10.92
15.5
9.3
.9
.8
4.13
5.1
13.4
3.4
2.7
6.15
10.0
10.4
1.7
1.3
6.11
10.8
WFC is mostly undervalued compared to the 10 year historical mean on both
relative and absolute basis.
Financial
Sector
Wells Fargo And Company (WFC)
Recommendation:
•Buy 233 Basis Points
Financial
Sector
J.P. Morgan (JPM)
Financial
Sector
JPM Key Financial Statistics
Price Related Information
Current Stock Price – $38.59
52-Week High – $48.20
52-Week Low – $35.16
Trailing P/E Ratio – 11.7
Dividend Yield – 0.5%
LT Future Growth Rate – 7.0%
Upside Potential
Price Targets:
•High – 55.5%
•Average – 35.5%
•Low – 11.4%
Analyst Recommendations
Buy – 28
Hold – 6
Sell – 0
Price Targets (21/35):
High – $60.00
Low – $43.00
Average – $52.29
Source: Bloomberg Terminal (analyst recommendations)
Financial
Sector
JPM Fundamental Analysis
Absolute Basis
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
118.4
22.4
1.6
3.0
29.9
Relative to
Sector
P/Trailing E
P/Forward E
P/B
P/S
P/CF
Low
9.5
8.7
0.6
1.2
7.5
Median
13.9
12.2
1.2
2.1
10.1
Current
11.7
9.1
1.0
1.6
8.8
High
Low
Median
Current
1.2
1.7
1.4
1.9
1.3
0.4
0.7
0.6
1.0
0.1
1.0
0.9
0.9
1.1
0.9
0.8
0.8
0.9
1.1
0.9
Relative to Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
1.1
1.3
2.2
2.2
1.1
Low
0.1
0.15
0.7
0.9
0.01
Median
1.0
0.94
1.1
1.1
1.0
Current
0.73
0.95
1.3
1.2
0.8
Relative to SP500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
6.9
1.7
0.6
2.2
2.9
Low
0.6
0.64
0.4
1.2
0.7
Median
0.85
0.81
0.5
1.7
1.0
Current
0.8
0.75
0.4
1.3
0.9
Overall Theme:
• JPM is overwhelmingly inexpensive on an absolute and relative basis
Financial
Sector
J.P. Morgan (JPM)
Recommendation:
•Buy 233 Basis Points
Financial
Sector
Summary of Conclusion
Company
Ticker
Current Price
Target Price
Return
Weights
Hudson City Bancorp
HCBK
$11.54
$12.05
4.42%
0 bps
Lazard
LAZ
$35.92
$38.94
8.41%
0 bps
Goldman Sachs
GS
$159.74
$192.56
20.55%
486 bps
Lincoln National
LNC
$23.55
$32.53
38.13%
233 bps
J.P. Morgan
JPM
$38.82
$52.29
34.70%
233 bps
Wells Fargo Company
WFC
$26.80
$35.47
31%
233 bps
Total
1185 bps
Financials
•Market Cap: $4,157 B
•SIM Weight: 11.85%
•S&P Weight: 15.57%
•Underweight: -3.72%
Financial
Sector
Financial
Sector
Thank You
Financial
Sector