Critical Analysis: JPMorgan Chase & Co. (NYSE:JPM) and First Merchants (NYSE:FRME)
JPMorgan Chase & Co. (NYSE:JPM) and First Merchants (NASDAQ:FRME) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, earnings, valuation, profitability and dividends.
This table compares JPMorgan Chase & Co. and First Merchants’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|JPMorgan Chase & Co.||24.28%||14.23%||1.25%|
71.4% of JPMorgan Chase & Co. shares are held by institutional investors. Comparatively, 73.4% of First Merchants shares are held by institutional investors. 0.8% of JPMorgan Chase & Co. shares are held by company insiders. Comparatively, 1.3% of First Merchants shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Volatility and Risk
JPMorgan Chase & Co. has a beta of 1.15, indicating that its stock price is 15% more volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.04, indicating that its stock price is 4% more volatile than the S&P 500.
This is a breakdown of recent recommendations and price targets for JPMorgan Chase & Co. and First Merchants, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|JPMorgan Chase & Co.||0||10||10||0||2.50|
JPMorgan Chase & Co. currently has a consensus target price of $123.69, indicating a potential upside of 7.28%. First Merchants has a consensus target price of $43.20, indicating a potential upside of 14.04%. Given First Merchants’ stronger consensus rating and higher possible upside, analysts clearly believe First Merchants is more favorable than JPMorgan Chase & Co..
JPMorgan Chase & Co. pays an annual dividend of $3.20 per share and has a dividend yield of 2.8%. First Merchants pays an annual dividend of $1.04 per share and has a dividend yield of 2.7%. JPMorgan Chase & Co. pays out 35.6% of its earnings in the form of a dividend. First Merchants pays out 32.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. JPMorgan Chase & Co. has increased its dividend for 8 consecutive years and First Merchants has increased its dividend for 7 consecutive years. JPMorgan Chase & Co. is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Valuation and Earnings
This table compares JPMorgan Chase & Co. and First Merchants’ top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|JPMorgan Chase & Co.||$131.41 billion||2.85||$32.47 billion||$9.00||12.81|
|First Merchants||$484.40 million||3.88||$159.14 million||$3.22||11.76|
JPMorgan Chase & Co. has higher revenue and earnings than First Merchants. First Merchants is trading at a lower price-to-earnings ratio than JPMorgan Chase & Co., indicating that it is currently the more affordable of the two stocks.
JPMorgan Chase & Co. beats First Merchants on 9 of the 17 factors compared between the two stocks.
JPMorgan Chase & Co. Company Profile
JPMorgan Chase & Co. operates as a financial services company worldwide. It operates through four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM). The CCB segment offers deposit and investment products and services to consumers; lending, deposit, and cash management and payment solutions to small businesses; mortgage origination and servicing activities; residential mortgages and home equity loans; and credit card, payment processing, auto loan, and leasing services. The CIB segment provides investment banking products and services, including advising on corporate strategy and structure, and capital-raising in equity and debt markets, as well as loan origination and syndication; treasury services, such as cash management and liquidity solutions; and cash securities and derivative instruments, risk management solutions, prime brokerage, and research. This segment also offers securities services, including custody, fund accounting and administration, and securities lending products for asset managers, insurance companies, and public and private investment funds. The CB segment provides financial solutions, including lending, treasury, investment banking, and asset management to corporations, municipalities, financial institutions, and nonprofit entities, as well as financing to real estate investors and owners. The AWM segment offers investment and wealth management services across various asset classes, such as equities, fixed income, alternatives, and money market funds; multi-asset investment management services; retirement products and services; and brokerage and banking services comprising trusts, estates, loans, mortgages, and deposits. The company also provides ATMs; digital covering online and mobile; and telephone banking services. JPMorgan Chase & Co. was founded in 1799 and is headquartered in New York, New York.
First Merchants Company Profile
First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. It accepts time, savings, and demand deposits; and provides consumer, commercial, agri-business, and real estate mortgage loans, as well as rents safe deposit facilities. The company also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services, as well as electronic and mobile delivery channels. It operates 116 banking locations in 31 Indiana, 2 Illinois, and 2 Ohio counties. The company offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1982 and is headquartered in Muncie, Indiana.
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