JPMorgan: A Top Quality Stock For An Attractive Valuation

You don't need to reinvent the wheel in order to do well in the stock market over the long term. Far from that, a simple and straightforward investment thesis can be particularly effective. JPMorgan (JPM) is a top-quality stock trading at attractive valuation levels, and this can be a sound strategy for superior returns going forward.

A Top-Quality Player

JPMorgan is the biggest US bank based on deposits and revenue. The company is also the largest issuer of credit cards, and it leads the industry in investment banking. In addition to this, JPMorgan has a wide global presence in trading services all over the world.

Brand recognition, scale, and market leadership are key sources of competitive strength for the company. Access to low-cost funding generates superior profitability. Besides, JPMorgan can offer more services to clients, which increases revenue per dollar of assets.

A large percentage of the costs of doing businesses for banks are relatively fixed in comparison to revenue, so a big revenue base has a positive impact on profitability for a market leader such as JPMorgan.

In terms of financial performance, JPMorgan has outperformed rivals such as Wells Fargo (WFC), Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), and Morgan Stanley (MS) over the long term.

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Source: JPMorgan Investors Presentation

In a very competitive industry, JPMorgan knows how to leverage its strengths to consistently gain market share versus the competition across different business areas.

(Click on image to enlarge)

Source: JPMorgan Investors Presentation

The table below shows key profitability statistics such as return on assets, return on equity, net margin, and revenue per employee for JPMorgan versus the average stock in the banking industry. These kinds of general comparisons are always painting with a broad brush, but the numbers look quite favorable for JPMorgan.

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Disclaimer: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in ...

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