DCF Studio

    JPM · NYQ · Financial Services

    JPMorgan Chase & Co.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 324.94

    Market price

    USD 349.67

    Implied upside

    -7.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedReported capital expenditure averages just 0.00% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 4.98% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 324.94-7.1%
    Exit multiple
    USD 507.73+45.2%
    Market price
    USD 349.67

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn34bn68bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 204.6bnUSD 230.1bnUSD 258.9bnUSD 291.3bnUSD 327.7bn+12.5%
    EBITUSD 81.9bnUSD 92.1bnUSD 103.6bnUSD 116.6bnUSD 131.2bn+12.5%
    NOPATUSD 65.1bnUSD 73.3bnUSD 82.4bnUSD 92.7bnUSD 104.3bn+12.5%
    Add depreciation & amortisationUSD 10.2bnUSD 11.5bnUSD 12.9bnUSD 14.5bnUSD 16.3bn+12.5%
    Less capital expenditureUSD -10.2bnUSD -11.5bnUSD -12.9bnUSD -14.5bnUSD -16.3bn+12.5%
    Less increase in working capitalUSD -22.7bnUSD -25.6bnUSD -28.8bnUSD -32.4bnUSD -36.4bn+12.5%
    Free cashflow to firmUSD 42.4bnUSD 47.7bnUSD 53.6bnUSD 60.3bnUSD 67.9bn+12.5%
    Discount factor0.95910.88220.81150.74650.6867-
    Present valueUSD 40.7bnUSD 42.1bnUSD 43.5bnUSD 45.1bnUSD 46.6bn+3.5%
    Present Value Of The ForecastUSD 217.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.983Reported 0.975, pulled toward 1.0 (Blume)
    Cost of equity10.41%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 20.5% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 929.5bn65.0% of capital
    Total debtUSD 500.0bn35.0% of capital, book value as a proxy
    Tax rate20.5%Effective, capped at statutory
    WACC8.71%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 324.94

    79% of EV

    Forecast FCFF, final year
    USD 67.9bn
    Capex at depreciation, working capital in reinvestment
    USD 104.3bn
    Less reinvestment at g/ROIC (28.7% of NOPAT)
    USD -29.9bn
    Capitalised
    USD 74.4bn
    ROIC (WACC floor)
    8.7%
    Terminal value, undiscounted
    USD 1227.0bn
    Terminal value, discounted
    USD 842.5bn
    Enterprise value
    USD 1060.5bn
    Less net debt
    USD 156.6bn
    Equity value
    USD 903.8bn

    Exit at 13.3x EBITDA

    Value per shareUSD 507.73

    86% of EV

    Terminal value, undiscounted
    USD 1967.4bn
    Terminal value, discounted
    USD 1351.0bn
    Enterprise value
    USD 1568.9bn
    Less net debt
    USD 156.6bn
    Equity value
    USD 1412.3bn

    Spread between methods: 44%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.71%449.80452.20454.68457.28460.03
    7.71%377.15378.89380.63382.37384.11
    8.71%321.98323.46324.93326.41327.89
    9.71%278.42279.69280.96282.24283.51
    10.71%243.21244.31245.42246.53247.63

    Outlined: this model. Green text: above today's price of 349.67. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year12.5%14.4%+1.9pp
    EBIT margin40.0%42.4%+2.3pp
    Discount rate8.7%8.2%-0.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.