JPMorgan Chase (JPM)

Total return at 5 years: 7.3%/year = 5.2% appreciation + 2.2% dividend. The target price ($430) is ex-dividend; the $41 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $551 · Multiples $380) exceeds the market price ($334).

Today — fairly valued: at $334 trades ~12.1% below its value discounted to today (~$380); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($430) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$241.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($334) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-7.4%/year) than we project (3.3%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$38.6 bn of owner earnings in year 5 (vs ~$66.8 bn of our base case). It recalculates if the DCF assumptions are edited.

A bank is valued on equity (P/E × common earnings + price/tangible book), not EV: deposits and debt are funding. It returns capital via dividend + buyback —the buyback reduces the share count, so earnings per share grow faster than aggregate earnings—. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

A bank is valued on equity (P/E × earnings to common + P/tangible book), not on EV. Rolling grid: the base year is the TTM (earnings to common $63.9bn as reported to Jun-2026, XBRL; normalized to ~$60.5bn — the Visa gain and the Q2'26 investment revaluation are backed out, the Q4'25 Apple Card provision is added back, and the slight haircut for a benign credit cycle is kept) and the projection is 12-month windows (+1y…+5y). It returns capital via dividends (~$6.00, +7%/year) + buybacks (which reduce the share count ~3%/year → EPS grows faster than earnings: ~$22.8 → ~$30.7 over five years). Total return adds the dividends collected along the way. Base case: earnings to common +3%/year, exit P/E 14× → price target ~$430.

Today's multiple compresses on its own going forward as the metric per share grows (accelerated by the buyback, which reduces the share count). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $430 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $334, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $430 in 5 years plus $41 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $380. Against the current market price ($334), the margin of safety is 12.1% (trades below the maximum → there is margin) and the total return at that price would be 7.3% annually.

• Multiple vs quality. P/E 15× already exceeds the 15× ceiling the method sets for banks.
• Price/tangible book vs the method's ceiling. 3× paid against the 2.5× ceiling the method sets for a bank — a premium over the bar, even with a 20% ROTCE.
• Margin of safety. Total return ~5% < required average return (10%) → minimal discount to today's value, well below the required margin.

• ROTCE exceeds the 10% bar. ROTCE 20% vs the 10% bar → +10pp of value creation per dollar of tangible capital.
• Capital adequacy. CET1 Standardized 14.1% (Advanced 14.1%, the currently binding ratio), against a Standardized requirement of 11.5% (including buffers) → ~310bp of headroom.
• Credit quality. Charge-offs 0.74% (benign vs ~1% through-cycle), coverage 1.83%.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

A bank's engine is volume × spread: the loan book and deposits grow and the net interest margin (~2.5%) captures the differential. Fees — investment banking, asset management on $7.7 trillion of client assets, and payments — round out revenue and do not consume capital.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real, not nominal. ~+3% revenue: mature, real growth, not inflated by FX or comps.
• Growth engine. Investment-banking share gains + buyback; not strong organic growth (it is a mature bank).
• Cyclicality. NII sensitive to rates (past its peak); markets/investment banking cyclical; credit yet to normalize.

• Relevant in 10 years (recurrence). Banking is essential and JPM is the undisputed leader; it will still be used in 10 years.
• Pricing power. Limited: rates are set by the Fed. The power lies in low funding cost (deposits), not in price-setting.
• Moat and its direction. Wide, stable moat: scale, deposits, diversification; the investment banking leadership is widening.
• Capital cycle. Mature, regulated sector: capital does not enter easily (GSIB barrier), but returns are cyclical (credit, rates).

• ✓Capital adequacy (CET1)CET1 14.1% (+2.6pp above the minimum)
• ✓Reserve coverage (allowance / loan book)1.79% of the loan book
• ✓Credit quality (net charge-off rate)0.70% annually
• ✓Value creation (ROTCE − 10% bar)+12pp
• ✓Funding (deposit base)Deposits $2,714 bn

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

ⓘ Has a loan book: credit health (delinquency, coverage, normalized CECL, RoA/RoE) is evaluated separately, not with corporate solvency.

• Capital. CET1 Standardized +310bp above the minimum: ample headroom for shocks and capital return.
• Credit. Benign charge-offs, ample coverage; NPAs 0.7% of the loan book.
• Funding. Deposits ~$2.71 trillion, loans/deposits 58% — stable funding, and plenty of it.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Reinvests at a 20% ROTCE (well above the 10% bar) and returns the rest: ~$47.7bn in 2025 (dividends $16bn, 29% payout + buybacks $31.6bn, authorized Jul 1, 2025 for $50bn). The nuance: buying back at {{mult2_hoy}} tangible book value is expensive — it destroys some book value per share; at this price, the dividend is a better use than the buyback.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Skin in the game. Dimon ~$2bn in shares (<1% given the size); high in absolute terms. 88% of variable comp tied to ROTCE.
• Capital allocation. Reinvests at a 20% ROTCE and returns the rest; but buying back at 3× tangible book is expensive.
• Integrity / track record. Dimon 21 years, ROTCE ≥18% in 6 of 10 years; speaks candidly about mistakes.

• There is no source of discount: JPM is a mega-cap heavily covered by analysts and correctly valued.
• It trades at a recognized premium (P/E 15×, price/tangible book 3×) over the balance-sheet peer group — the market already pays for its quality.
• The expected return (+7% with dividend) falls short of the required average return (10%): it does not compensate for the risk of a leveraged bank.

With no identifiable missing buyers or motivated sellers → it is not cheap; it is a great business at a full price. Quality is at its peak, but the price leaves no margin.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -2%/year (-11% total): the margin of safety protects the downside. The bull (+12%/year, +74% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Credit cycle. Provision $14.2bn in 2025 (from $10.7bn); in a recession, charge-offs above 1.5% would hit earnings — the central disconfirmer.
• Demanding multiple. 15× on peak earnings → double premium; a disappointment would re-rate it.
• Rate sensitivity. NIM compresses if rates fall (it has already gone from 2.70% to 2.50%).
• Regulation. Capital rules (Basel) change the required return — favorable today, reversible.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROTCE 22% above the 10% bar, but the margin is limited (+12%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 3% at a PEG of 4.5 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -7% vs our 3%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -5%/yr, bull-scenario ceiling +10%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: cost advantage, efficient scale, switching costs, intangibles → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -7%, within what we project (3%) — the story squares with the numbers.