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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But JPMorgan Chase & Co. (NYSE:JPM) has fallen short of that second goal, with a share price rise of 38% over five years, which is below the market return. Looking at the last year alone, the stock is up 12%.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for JPMorgan Chase
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, JPMorgan Chase managed to grow its earnings per share at 16% a year. This EPS growth is higher than the 7% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.97.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that JPMorgan Chase has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at JPMorgan Chase's financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for JPMorgan Chase the TSR over the last 5 years was 61%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
JPMorgan Chase's TSR for the year was broadly in line with the market average, at 16%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 10%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand JPMorgan Chase better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with JPMorgan Chase .