Finance

Critical Comparison: JPMorgan Chase & Co. (JPM) vs. Yandex N.V. (YNDX)

JPMorgan Chase & Co. (NYSE:JPM) shares are up more than 5.63% this year and recently decreased -0.34% or -$0.38 to settle at $112.96. Yandex N.V. (NASDAQ:YNDX), on the other hand, is up 4.03% year to date as of 05/17/2018. It currently trades at $34.07 and has returned -3.40% during the past week.

JPMorgan Chase & Co. (NYSE:JPM) and Yandex N.V. (NASDAQ:YNDX) are the two most active stocks in the Money Center Banks industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.

Growth

One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect JPM to grow earnings at a 10.91% annual rate over the next 5 years. Comparatively, YNDX is expected to grow at a 0.50% annual rate. All else equal, JPM’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. , compared to an EBITDA margin of 28.07% for Yandex N.V. (YNDX). JPM’s ROI is 6.90% while YNDX has a ROI of 8.10%. The interpretation is that YNDX’s business generates a higher return on investment than JPM’s.

Cash Flow



Cash is king when it comes to investing. JPM’s free cash flow (“FCF”) per share for the trailing twelve months was +0.46. Comparatively, YNDX’s free cash flow per share was +0.21. On a percent-of-sales basis, JPM’s free cash flow was 1.39% while YNDX converted 4.2% of its revenues into cash flow. This means that, for a given level of sales, YNDX is able to generate more free cash flow for investors.

Liquidity and Financial Risk

JPM’s debt-to-equity ratio is 1.19 versus a D/E of 0.13 for YNDX. JPM is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

JPM trades at a forward P/E of 11.49, a P/B of 1.70, and a P/S of 5.72, compared to a forward P/E of 22.40, a P/B of 4.85, and a P/S of 6.85 for YNDX. JPM is the cheaper of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. JPM is currently priced at a -7.41% to its one-year price target of 122.00. Comparatively, YNDX is -27.7% relative to its price target of 47.12. This suggests that YNDX is the better investment over the next year.

Risk and Volatility

Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. JPM has a beta of 1.21 and YNDX’s beta is 2.69. JPM’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. JPM has a short ratio of 1.55 compared to a short interest of 0.83 for YNDX. This implies that the market is currently less bearish on the outlook for YNDX.

Summary




Yandex N.V. (NASDAQ:YNDX) beats JPMorgan Chase & Co. (NYSE:JPM) on a total of 7 of the 14 factors compared between the two stocks. YNDX is growing fastly, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, JPM is the cheaper of the two stocks on an earnings, book value and sales basis, YNDX is more undervalued relative to its price target. Finally, YNDX has better sentiment signals based on short interest.

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