Is JPMorgan Chase (JPM) the Most Profitable "Cheap" Stock to Buy Now?

JPMorgan Chase (NYSE: JPM) has long been a titan of the banking sector, but recent financial results and valuation metrics raise a compelling question: Is this Wall Street powerhouse now one of the most profitable "cheap" stocks to buy? Let’s dissect the data.

Q1 2025 Earnings: A Strong Beat

JPMorgan’s first-quarter performance delivered a resounding win for investors. Net income rose 9% year-over-year (YoY) to $14.6 billion, while earnings per share (EPS) surged to $5.07, outperforming estimates by nearly 10%. Revenue hit $46.0 billion, a 8.1% YoY increase, driven by robust performance across key segments:

• Payments: Revenue grew 2% to $4.6 billion, fueled by strategic partnerships like its Embedded Finance solution for Walmart Marketplace sellers and a deal with PayPal to expand merchant services in Europe.
• Equity Markets: Revenue jumped 48% YoY to $3.8 billion, benefiting from heightened trading activity.
• Card Services & Auto: Revenue rose 12% YoY to $6.85 billion, as higher credit card balances and auto loan growth offset weaker performance in wealth management.

Valuation: Undervalued or Overpriced?

To assess if JPM is "cheap," we turn to key metrics:

• P/E Ratio: At 11.44, JPM’s valuation is below its 10-year median of 15.1 and far below its sector peers. A P/E of 11.44 implies investors are paying less than 12 times earnings, suggesting strong value relative to its growth trajectory.

- P/B Ratio: JPM’s 2.04 is elevated compared to its industry median of 0.86, reflecting its premium valuation in tangible assets. However, this ratio remains below its all-time high of 2.38 and aligns with its position as a leader in payments and investment banking.

The real standout is the PEG Ratio, which factors in earnings growth. At 0.54, JPM’s PEG is 36% below its 12-month average and 67% below its 3-year average. With a TTM EPS growth rate of 23.01%, the PEG of 0.54 (P/E of 12.40 divided by 23% growth) signals the stock is trading at a significant discount to its growth potential.

Profitability: A Machine of Efficiency

JPM’s Return on Tangible Common Equity (ROTCE) of 21% underscores its operational excellence. This metric, a staple for banks, highlights how effectively JPM generates returns from its tangible assets. Combined with a CET1 capital ratio of 15.4%, the bank maintains ample capital buffers to navigate economic uncertainty.

Risks on the Horizon

Despite its strengths, JPM faces headwinds:
1. Macroeconomic Uncertainty: Elevated credit costs ($3.3 billion) and a projected unemployment rate rise to 5.8% could pressure loan portfolios.
2. Interest Rate Sensitivity: While rising rates benefit net interest income, prolonged economic slowdowns could reduce demand for loans.
3. Global Competitiveness: Rival banks like Citigroup (C) or Goldman Sachs (GS) may undercut JPM’s fee-based revenue streams.

Analyst Consensus: Caution with Optimism

• Zacks Rank: JPM holds a #3 ("Hold") rating, reflecting cautious sentiment amid broader market risks.
• Price Targets: Analysts project a range of $180.51 to $330, with a consensus near $240, suggesting a potential 23% upside from its May 2025 price of $195.
• Dividend Strength: JPM has increased its dividend for 14 consecutive years, currently yielding 2.3%—a rare combination of growth and income.

Conclusion: A Compelling Case for JPM

JPMorgan Chase emerges as a high-conviction buy for long-term investors. Its 9% YoY net income growth, 23% EPS expansion, and a PEG Ratio of 0.54 all point to a stock trading at a discount to its growth prospects. While risks like credit quality and macroeconomic factors are valid, JPM’s fortress-like balance sheet, dominant market share, and strategic investments (e.g., Embedded Finance) position it to outperform peers over time.

For context, compare JPM’s valuation to its peers:
- Bank of America (BAC): PEG of 2.48 (overvalued relative to growth).
- Wells Fargo (WFC): PEG of 0.81 (less compelling than JPM’s 0.54).

The 21% ROTCE, $90 billion full-year net interest income guidance, and its top rankings in digital banking (per Crisil and J.D. Power) further cement JPM’s case. While volatility is inevitable, JPM’s blend of profitability, valuation, and defensive qualities makes it a standout option in a challenging market.

Investors seeking a bank stock with growth, stability, and a dividend would do well to consider JPM. Just remember: no stock is risk-free. Monitor credit metrics and macro signals closely, but for now, the math leans heavily in JPM’s favor.