JPMorgan Chase & Co. (JPM) Discounted Future Market Cap

JPMorgan Chase & Co.

JPM (NYSE)

(%)

Valuation
JPMorgan Chase & Co. Discounted Future Market Cap

"""
    Model: Discounted Future Market Cap

# Render model description
model.render_description(r"""
## Discounted Future Market Cap

This model estimates the intrinsic value of a common share by projecting the Future Market Capitalization using the estimated PE Ratio and then discounting it to the Present using an Annual Required Rate of Return.
""")

# Initialize assumptions
assumptions.init({
    "data": {
        "%discount_rate": None,
        "beta": data.get("profile:beta", default=1),
        "%risk_free_rate": data.get("treasury:year10"),
        "%market_premium": data.get("risk:totalEquityRiskPremium"),
        "pe_ratio": data.get("quote:close") / data.get("income:eps"),
        "%revenue_growth_rate": None,
        "%net_income_margin": None,
        "historical_years": 10,
        "projection_years": 5,
    },
    "hierarchies": [{
        "parent": "%discount_rate",
        "children": ["beta", "%risk_free_rate", "%market_premium"]
    }]
})

# Calculate cost of equity
cost_of_equity = assumptions.get("%risk_free_rate") + assumptions.get("beta") * assumptions.get("%market_premium")
assumptions.set("%discount_rate", cost_of_equity)

# Compute metrics
data.compute({
    "%grossMargin": "income:grossProfit / income:revenue",
    "%operating_margin": "income:operatingIncome / income:revenue",
    "%netMargin": "income:netIncome / income:revenue",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "%netIncomeGrowthRate": "function:growth:income:netIncome",
    "%totalStockholdersEquityGrowthRate": "function:growth:balance:totalStockholdersEquity",

# Calculating NOPAT (Net Operating Profit After Taxes)
    "%taxRate": "income:incomeTaxExpense / income:incomeBeforeTax",
    "incomeTax": "income:operatingIncome * %taxRate",
    "nopat": "income:operatingIncome - incomeTax",

# Calculating Invested Capital
    "investedCapital": [
        "balance:totalNonCurrentAssets", "-", "balance:cashAndCashEquivalents", "+",
        "balance:totalCurrentAssets", "-", "balance:totalCurrentLiabilities"
    ],
    "%roic": "nopat / investedCapital",
})

data.set_default_range(f"{-assumptions.get('historical_years')}->0")

assumptions.set("%net_income_margin", data.average(f"%netMargin"))
assumptions.set_bounds(
    "%net_income_margin", low=0, high="100%"
)

assumptions.set("%revenue_growth_rate", data.average(f"%revenueGrowthRate"))
assumptions.set_bounds(
    "%revenue_growth_rate", low=0, high="25%"
)

# Calculate a linear regression for forecasting revenues
data.compute({
    "linearRegressionRevenue": f"function:linear_regression:income:revenue start:{-assumptions.get('historical_years')}",
}, forecast=assumptions.get("projection_years"))

# Compute forecasted values and ratios
data.compute({
    "income:revenue": f"function:compound:{data.get('linearRegressionRevenue:1')} rate:{assumptions.get('%revenue_growth_rate')} offset:-1",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "income:netIncome": f"income:revenue * {assumptions.get('%net_income_margin')}",
}, forecast=assumptions.get("projection_years"))

projected_revenue = data.get("revenue")
projected_net_income = data.get(f"income:netIncome:{assumptions.get('projection_years')}")

shares_outstanding = data.get("income:weightedAverageShsOut")
future_market_cap = assumptions.get("pe_ratio") * projected_net_income
discounted_future_market_cap = future_market_cap / (
            (1 + assumptions.get("%discount_rate")) ** assumptions.get("projection_years"))

stock_value = discounted_future_market_cap / shares_outstanding

# Set the final value
model.set_final_value({
    "value": stock_value,
    "units": "$"
})

# Render results
model.render_results([
    [stock_value, "Present Value", "$"],
    [projected_net_income, "Estimated net income", "$"],
    [future_market_cap, "Estimated market capitalization", "$"],
    [discounted_future_market_cap, "Market capitalization discounted to present", "$"],
    [shares_outstanding, "Shares Outstanding", "#"],
    [data.get("income:eps"), "Earnings Per Share (EPS)", "$"],
    [data.get("quote:close"), "Market Price", "$"],
    [data.get("ratio:priceEarningsRatio"), "Price to Earnings (PE) Ratio", "#"]
])

# Render chart
model.render_chart({
    "data": {
        "income:revenue": "Revenue",
        "income:netIncome": "Net Income",
        "linearRegressionRevenue": "Linear Regression Revenue"
    },
    "start": -assumptions.get("historical_years"),
    "end": "*",
    "properties": {
        "title": "Historical and forecasted data",
        "set_editable": [
            "income:revenue",
            "income:netIncome"
        ],
        "hidden_keys": ["linearRegressionRevenue"]
    }
})

# Render table for estimated future values
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
    },
    "start": -1,
    "end": "*",
    "properties": {
        "title": "Estimated Future Values",
        "order": "ascending",
        "number_format": "M"
    }
})

# Render historical values table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "income:costOfRevenue": "Cost of Revenue",
        "income:grossProfit": "Gross Profit",
        "%grossMargin": "Gross Margin",
        "income:operatingIncome": "Operating Income",
        "%operating_margin": "Operating Margin",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Values",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Render historical growth rates table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
        "%netIncomeGrowthRate": "Net Income Growth Rate",
        "balance:totalStockholdersEquity": "Stockholders Equity",
        "%totalStockholdersEquityGrowthRate": "Equity Growth Rate",
        "%roic": "Return on Invested Capital (ROIC)",
        "nopat": "After-tax Operating Income",
        "%taxRate": "Income Tax Rate",
        "investedCapital": "Invested Capital",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Growth Rates",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Set description for assumptions
assumptions.set_description({
    "%discount_rate": r"""
        ## Discount Rate

`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
    """,

"beta": r"""
        ## Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.
    """,

"%risk_free_rate": r"""
        ## Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
        By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.
    """,

"%market_premium": r"""
        ## Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.
    """,

"pe_ratio": r"""
        ## Price to Earnings (PE) Ratio

Estimated Price to Earnings (PE) Ratio at the end of the projection period.

`Future Market Cap` = `PE Ratio` * `Projected Net Income`
    """,

"%revenue_growth_rate": r"""
        ## Revenue Growth Rate

The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.
    """,

"%net_income_margin": r"""
        ## Net Income Margin

Net Income expressed as a percentage of Revenue.
    """,

"historical_years": r"""
        ## Historical Years

The number of historical years used to calculate averages for historical data.
    """,

"projection_years": r"""
        ## Projection Years

The number of years for projecting the analysis into the future.
    """,
})

print("End of model.")

Estimated Value

USD

Market Price USD

* Values are not guaranteed, please do your own
research before making investment decisions.

Discounted Future Market Cap

Interactive Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.	#
↳ Risk Free Rate Risk-Free Rate The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.	%
↳ Market Premium Market Premium Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.	%
Pe Ratio Price to Earnings (PE) Ratio Estimated Price to Earnings (PE) Ratio at the end of the projection period. `Future Market Cap` = `PE Ratio` * `Projected Net Income`	#
Revenue Growth Rate Revenue Growth Rate The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.	%
Net Income Margin Net Income Margin Net Income expressed as a percentage of Revenue.	%
Historical Years Historical Years The number of historical years used to calculate averages for historical data.	#
Projection Years Projection Years The number of years for projecting the analysis into the future.	#

Results
Present Value	279.8 USD
Estimated net income	86.14 Bil. USD
Estimated market capitalization	1,216 Bil. USD
Market capitalization discounted to present	789 Bil. USD
Shares Outstanding	2.82 Bil.
Earnings Per Share (EPS)	20.41 USD
Market Price	288.2 USD
Price to Earnings (PE) Ratio	13.61

Historical and forecasted data

Monetary values are in USD

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Edit Chart Values	2025	2026	2027	2028	2029

↳ Growth Rate

Estimated Future Values

amounts of USD except for #	2024	LTM	2025	2026	2027	2028	2029
Revenue	270,789	273,416	238,329	262,877	289,954	319,819	352,760
Revenue Growth Rate	14.61%	0.97%	-11.99%	10.3%	10.3%	10.3%	10.3%
Net Income	58,471	59,695	58,200	64,195	70,807	78,100	86,144

Historical Values

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	162,336	273,416	270,789	236,273	153,824	127,238	129,843	142,515	129,824	114,579	106,387	101,006
Cost of Revenue	43,215	112,692	112,004	90,603	32,432	-3,667	27,372	32,380	25,912	19,164	15,179	11,290
Gross Profit	119,121	160,724	158,785	145,670	121,392	130,905	102,471	110,135	103,912	95,415	91,208	89,716
Gross Margin	77.72%	58.78%	58.64%	61.65%	78.92%	102.9%	78.92%	77.28%	80.04%	83.27%	85.73%	88.82%
Operating Income	49,200	76,196	75,081	61,612	46,166	59,562	35,815	44,866	40,764	35,900	34,536	30,702
Operating Margin	31.2%	27.87%	27.73%	26.08%	30.01%	46.81%	27.58%	31.48%	31.4%	31.33%	32.46%	30.4%
Net Income	38,671	59,695	58,471	49,552	37,676	48,334	29,131	36,431	32,474	24,441	24,733	24,442
Net Margin	24.42%	21.83%	21.59%	20.97%	24.49%	37.99%	22.44%	25.56%	25.01%	21.33%	23.25%	24.2%

Historical Growth Rates

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	162,336	273,416	270,789	236,273	153,824	127,238	129,843	142,515	129,824	114,579	106,387	101,006
Revenue Growth Rate	10.3%	0.97%	14.61%	53.6%	20.89%	-2.01%	-8.89%	9.78%	13.31%	7.7%	5.33%	-1.94%
Net Income	38,671	59,695	58,471	49,552	37,676	48,334	29,131	36,431	32,474	24,441	24,733	24,442
Net Margin	24.42%	21.83%	21.59%	20.97%	24.49%	37.99%	22.44%	25.56%	25.01%	21.33%	23.25%	24.2%
Net Income Growth Rate	12.08%	2.09%	18%	31.52%	-22.05%	65.92%	-20.04%	12.19%	32.87%	-1.18%	1.19%	12.4%
Stockholders Equity	287,743	351,420	344,758	327,878	292,332	294,127	279,354	261,330	256,515	255,693	254,190	247,573
Equity Growth Rate	3.92%	1.93%	5.15%	12.16%	-0.61%	5.29%	6.9%	1.88%	0.321%	0.591%	2.67%	6.84%
Return on Invested Capital (ROIC)	20.13%	9.17%	19.05%	37.6%	83.96%	-38.62%	49.62%	11.62%	11.36%	17.53%	12.2%	7.92%
After-tax Operating Income	38,671	59,695	58,471	49,552	37,676	48,334	29,131	36,431	32,474	24,441	24,733	24,442
Income Tax Rate	21.73%	21.66%	22.12%	19.57%	18.39%	18.85%	18.66%	18.8%	20.34%	31.92%	28.38%	20.39%
Invested Capital	210,744	650,947	307,000	131,772	44,873	-125,152	58,708	313,438	285,794	139,450	202,647	308,709