Wells Fargo & Co Valuation – April 2019 #WFC

Company Profile (excerpt from Reuters): Wells Fargo & Company, incorporated on January 24, 1929, is a bank holding company. The Company is a diversified financial services company. The Company has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. The Company provides other financial services through its subsidiaries engaged in various businesses, principally: wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment. The Company has its administrative facilities at various locations, including Phoenix, Arizona; San Francisco, California; San Jose, California; Greenwood Village, Colorado; Littleton, Colorado; Rochester, Minnesota; St. Louis, Missouri; Las Vegas, Nevada; Portland, Oregon, and Austin, Texas. The Company offers approximately 13,000 automated teller machines (ATMs) and over 6,000 retail banking stores coast to coast.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WFC – April 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $220,466,305,698 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 55.90% Pass
5. Moderate PEmg Ratio PEmg < 20 11.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.16 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.33
MG Growth Estimate 1.75%
MG Value $52.06
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $62.85
MG Value based on 0% Growth $36.84
Market Implied Growth Rate 1.36%
Current Price $48.61
% of Intrinsic Value 93.38%

Wells Fargo & Co qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.88 in 2015 to an estimated $4.33 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 1.36% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Wells Fargo & Co revealed the company was trading below its Graham Number of $63.18. The company pays a dividend of $1.64 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.21, which was below the industry average of 15.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Wells Fargo & Co fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $63.18
PEmg 11.21
PB Ratio 1.16
Dividend Yield 3.37%
TTM Dividend $1.64
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $229,044,000,000
Total Assets $1,895,883,000,000
Intangible Assets $43,055,000,000
Total Liabilities $1,698,817,000,000
Shares Outstanding (Diluted Average) 4,698,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.70
Dec2018 $4.28
Dec2017 $4.10
Dec2016 $3.99
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.47
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.16
Dec1999 $1.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.33
Dec2018 $4.14
Dec2017 $4.06
Dec2016 $3.99
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.18
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46

Recommended Reading:

Other ModernGraham posts about the company

Wells Fargo & Co Valuation – June 2018 $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
Wells Fargo & Co Valuation – August 2017 $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – January 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2016

Other ModernGraham posts about related companies

Comerica Inc Valuation – March 2019 #CMA
SVB Financial Group Valuation – March 2019 #SIVB
US Bancorp Valuation – March 2019 #USB
Citizens Financial Group Inc Valuation – February 2019 $CFG
BB&T Corp Valuation – February 2019 $BBT
M&T Bank Corp Valuation – February 2019 $MTB
Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Wells Fargo & Co Valuation – June 2018 $WFC

Company Profile (excerpt from Reuters): Wells Fargo & Company, incorporated on January 24, 1929, is a bank holding company. The Company is a diversified financial services company. The Company has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. The Company provides other financial services through its subsidiaries engaged in various businesses, principally: wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment. The Company has its administrative facilities at various locations, including Phoenix, Arizona; San Francisco, California; San Jose, California; Greenwood Village, Colorado; Littleton, Colorado; Rochester, Minnesota; St. Louis, Missouri; Las Vegas, Nevada; Portland, Oregon, and Austin, Texas. The Company offers approximately 13,000 automated teller machines (ATMs) and over 6,000 retail banking stores coast to coast.

WFC Chart

WFC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WFC – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $260,454,214,103 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 81.86% Pass
5. Moderate PEmg Ratio PEmg < 20 12.95 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.28 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.13
MG Growth Estimate 2.20%
MG Value $53.25
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $59.85
MG Value based on 0% Growth $35.08
Market Implied Growth Rate 2.22%
Current Price $53.43
% of Intrinsic Value 100.35%

Wells Fargo & Co qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.6 in 2014 to an estimated $4.13 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 2.22% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Wells Fargo & Co revealed the company was trading below its Graham Number of $59.51. The company pays a dividend of $1.54 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.95, which was below the industry average of 21.57, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Wells Fargo & Co fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $59.51
PEmg 12.95
PB Ratio 1.28
Dividend Yield 2.88%
TTM Dividend $1.54
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $227,302,000,000
Total Assets $1,915,388,000,000
Intangible Assets $44,240,000,000
Total Liabilities $1,709,478,000,000
Shares Outstanding (Diluted Average) 4,930,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.24
Dec2017 $4.10
Dec2016 $3.99
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.47
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.16
Dec1999 $1.15
Dec1998 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.13
Dec2017 $4.06
Dec2016 $3.99
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.18
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46
Dec2002 $1.21

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
Wells Fargo & Co Valuation – August 2017 $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – January 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2016
10 Best Dividend Paying Stocks for the Defensive Investor – August 2016

Other ModernGraham posts about related companies

SunTrust Banks Inc Valuation – June 2018 $STI
Comerica Inc Valuation – June 2018 $CMA
SVB Financial Group Valuation – June 2018 $SIVB
US Bancorp Valuation – May 2018 $USB
Bank of New York Mellon Corp Valuation – May 2018 $BK
Citizens Financial Group Inc Valuation – April 2018 $CFG
BB&T Corporation Valuation – April 2018 $BBT
M&T Bank Corp Valuation – April 2018 $MTB
Bank of America Corp Valuation – March 2018 $BAC
Fifth Third Bancorp Valuation – March 2018 $FITB

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Wells Fargo & Co Valuation – August 2017 $WFC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Wells Fargo & Co (WFC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wells Fargo & Company is a bank holding company. The Company is a diversified financial services company. It has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company offers its services under three categories: personal, small business and commercial. It provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. It provides other financial services through its subsidiaries engaged in various businesses, including wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, computer and data processing services, investment advisory services, mortgage-backed securities servicing and venture capital investment.

WFC Chart

WFC data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of WFC – August 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $257,827,293,159 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 159.23% Pass
5. Moderate PEmg Ratio PEmg < 20 12.93 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.27 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.02
MG Growth Estimate 4.02%
MG Value $66.46
Opinion Fairly Valued
MG Grade B+
MG Value based on 3% Growth $58.25
MG Value based on 0% Growth $34.15
Market Implied Growth Rate 2.21%
Current Price $51.94
% of Intrinsic Value 78.15%

Wells Fargo & Co qualifies for both the Defensive Investor and the Enterprising Investor.  In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.17 in 2013 to an estimated $4.02 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 2.21% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Wells Fargo & Co revealed the company was trading below its Graham Number of $55.83.  The company pays a dividend of $1.52 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 12.93, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Wells Fargo & Co performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $55.83
PEmg 12.93
PB Ratio 1.27
Dividend Yield 2.92%
TTM Dividend $1.52
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Long-Term Debt & Capital Lease Obligation $238,869,000,000
Total Assets $1,930,871,000,000
Intangible Assets $40,761,000,000
Total Liabilities $1,725,641,000,000
Shares Outstanding (Diluted Average) 5,037,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.97
Dec2016 $3.99
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.47
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.16
Dec1999 $1.15
Dec1998 $0.59
Dec1997 $0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.02
Dec2016 $3.99
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.18
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46
Dec2002 $1.21
Dec2001 $0.99

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – May 2016
13 Best Stocks For Value Investors This Week – 12/12/15
Wells Fargo & Co Valuation – December 2015 Update $WFC
The Best Companies of the Banking Industry – October 2015
10 Most Undervalued Companies for the Defensive Investor – September 2015

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Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
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Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
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Canadian Western Bank Valuation – Initial Coverage $TSE:CWB
CVB Financial Corp Valuation – Initial Coverage $CVBF
Customers Bancorp Inc Valuation – Initial Coverage $CUBI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Wells Fargo & Co Valuation – June 2016 $WFC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Wells Fargo & Co (WFC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wells Fargo & Company is a bank holding company. The Company is a financial services company, which offers banking, insurance, trust and investments, mortgage banking, investment banking, retail banking, brokerage, and consumer and commercial finance. It has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. Its Community Banking segment offers financial products and services for consumers and small businesses, including checking and savings accounts, credit and debit cards, and auto, student and small business lending. Its Wholesale Banking segment provides financial solutions to businesses across the United States and globally. Its Wealth and Investment Management segment provides a range of personalized wealth management, investment, and retirement products and services to clients across the United States-based businesses. It operates through over 8,700 locations and approximately 13,000 automated teller machines.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of WFC – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $221,415,190,276 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 149.28% Pass
5. Moderate PEmg Ratio PEmg < 20 11.62 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.19 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

WFC value Chart June 2016

EPSmg $3.93
MG Growth Estimate 7.75%
MG Value $94.45
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $57.05
MG Value based on 0% Growth $33.44
Market Implied Growth Rate 1.56%
Current Price $45.71
% of Intrinsic Value 48.40%

Wells Fargo & Co qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.59 in 2012 to an estimated $3.93 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.56% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Wells Fargo & Co performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

WFC Charts June 2016

Graham Number $54.19
PEmg 11.62
PB Ratio 1.19
Dividend Yield 3.28%
TTM Dividend $1.50
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Long-Term Debt $227,888,000,000
Total Assets $1,849,182,000,000
Intangible Assets $39,695,000,000
Total Liabilities $1,651,686,000,000
Shares Outstanding (Diluted Average) 5,139,400,000

Earnings Per Share History

Next Fiscal Year Estimate $3.82
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.49
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.17
Dec1999 $1.12
Dec1998 $0.59
Dec1997 $0.88
Dec1996 $0.77

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.93
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.19
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46
Dec2002 $1.21
Dec2001 $1.00
Dec2000 $0.97

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – May 2016
13 Best Stocks For Value Investors This Week – 12/12/15
Wells Fargo & Co Valuation – December 2015 Update $WFC
The Best Companies of the Banking Industry – October 2015
10 Most Undervalued Companies for the Defensive Investor – September 2015

Other ModernGraham posts about related companies

State Street Corp Valuation – June 2016 $STT
KeyCorp Valuation – June 2016 $KEY
PNC Financial Services Group Inc Valuation – June 2016 $PNC
People’s United Financial Inc Valuation – June 2016 $PBCT
BB&T Corporation Valuation – May 2016 $BBT
SunTrust Banks Inc Valuation – February 2016 $STI
Comerica Inc Stock Valuation – February 2016 $CMA
U.S. Bancorp Valuation – February 2016 $USB
JP Morgan Chase Valuation – January 2016 Update $JPM
Comerica Inc Stock Valuation – February 2016 $CMA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Wells Fargo & Co Valuation – December 2015 Update $WFC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Wells Fargo & Co (WFC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wells Fargo & Company is a financial services and bank holding company. The Company’s segments are Community Banking, Wholesale Banking, and Wealth and Brokerage and Retirement. The Company’s Community Banking segment offers a range of financial products and services for consumers and small businesses, including checking and savings accounts, credit and debit cards, and auto, student and small business lending. The Community Banking segment’s products include investment, insurance and trust services, and mortgage and home equity loans. The Community Banking segment’s products and business segments include middle market commercial banking, government and institutional banking, corporate banking and commercial real estate, among others. The Company’s Wholesale Banking segment provides a range of financial solutions to businesses across the United States and around the world. The Wealth and Brokerage and Retirement segment provides a range of financial advisory services.

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ModernGraham Valuation of WFC – December 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $278,394,147,199 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 117.48% Pass
5. Moderate PEmg Ratio PEmg < 20 13.78 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.43 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

WFC value Chart December 2015

EPSmg $3.87
MG Growth Estimate 12.22%
MG Value $127.37
Opinion Undervalued
MG Value based on 3% Growth $56.08
MG Value based on 0% Growth $32.87
Market Implied Growth Rate 2.64%
Current Price $53.31
% of Intrinsic Value 41.85%

Wells Fargo & Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.13 in 2011 to an estimated $3.87 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.64% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Wells Fargo & Co (WFC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

WFC Charts December 2015

Graham Number $55.37
PEmg 13.78
PB Ratio 1.43
Dividend Yield 2.72%
Number of Consecutive Years of Dividend Growth 5

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Long-Term Debt $185,274,000,000
Total Assets $1,751,265,000,000
Intangible Assets $38,739,000,000
Total Liabilities $1,558,214,000,000
Shares Outstanding (Diluted Average) 5,193,800,000

Earnings Per Share History

Next Fiscal Year Estimate $4.08
Dec14 $4.10
Dec13 $3.89
Dec12 $3.36
Dec11 $2.82
Dec10 $2.21
Dec09 $1.75
Dec08 $0.70
Dec07 $2.38
Dec06 $2.47
Dec05 $2.25
Dec04 $2.05
Dec03 $1.83
Dec02 $1.58
Dec01 $0.99
Dec00 $1.16
Dec99 $1.15
Dec98 $0.59
Dec97 $0.74
Dec96 $0.68
Dec95 $0.68

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.87
Dec14 $3.60
Dec13 $3.17
Dec12 $2.59
Dec11 $2.13
Dec10 $1.83
Dec09 $1.73
Dec08 $1.80
Dec07 $2.30
Dec06 $2.18
Dec05 $1.94
Dec04 $1.69
Dec03 $1.46
Dec02 $1.21
Dec01 $0.99
Dec00 $0.95
Dec99 $0.82

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Banking Industry – October 2015
10 Most Undervalued Companies for the Defensive Investor – September 2015
15 Best Stocks For Value Investors This Week – 9/4/15
Wells Fargo & Co. Analysis – September 2015 Update $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – August 2015

Other ModernGraham posts about related companies

Citigroup Inc Valuation – December 2015 Update $C
People’s United Financial Corp Valuation – December 2015 Update $PBCT
M&T Bank Corp Valuation – December 2015 Update $MTB
KeyCorp Valuation – November 2015 Update $KEY
State Street Corp Valuation – November 2015 Update $STT
BB&T Corporation Valuation – November 2015 Update $BBT
PNC Financial Services Group Valuation – November 2015 Update $PNC
SunTrust Banks Inc. Valuation – November 2015 Update $STI
U.S. Bancorp Valuation – November 2015 Update $USB
Starwood Property Trust Inc. Valuation – October 2015 Update $STWD

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Wells Fargo & Co. Analysis – September 2015 Update $WFC

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.

We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.

In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

What follows is a specific look at how Wells Fargo & Co. (WFC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wells Fargo & Company is a financial and bank holding company. Its principal business is to act as a holding company for its subsidiaries. The Company is a diversified financial services company. It has three operating segments: Community Banking, Wholesale Banking and Wealth, and Brokerage and Retirement. The Company provides retail, commercial and corporate banking services through banking stores and offices, the Internet and other distribution channels to individuals, businesses and institutions in all around 50 states, the District of Columbia and in other countries. The Company provides other financial services, such as wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment.
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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of WFC – August 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Pass
5. Moderate PEmg Ratio PEmg < 20 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg 3.86
MG Growth Estimate 12.19%
MG Value $127.08
Opinion Undervalued
MG Value based on 3% Growth $56.03
MG Value based on 0% Growth $32.84
Market Implied Growth Rate 2.36%
Current Price $51.06
% of Intrinsic Value 40.18%

Wells Fargo & Co. qualifies for either the Defensive Investor or the Enterprising Investor.  The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial statements.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.13 in 2011 to an estimated $3.86 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.36% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Wells Fargo & Co. (WFC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

WFC Charts August 2015

Graham Number $57.66
PEmg 13.21
PB Ratio 1.41
Dividend Yield 2.79%
Number of Consecutive Years of Dividend Growth 5

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Long-Term Debt $179,751,000,000
Total Assets $1,720,617,000,000
Intangible Assets $39,628,000,000
Total Liabilities $1,531,059,000,000
Shares Outstanding (Diluted Average) 5,220,500,000

Earnings Per Share History

Next Fiscal Year Estimate $4.07
Dec14 $4.10
Dec13 $3.89
Dec12 $3.36
Dec11 $2.82
Dec10 $2.21
Dec09 $1.75
Dec08 $0.70
Dec07 $2.38
Dec06 $2.49
Dec05 $2.25
Dec04 $2.05
Dec03 $1.83
Dec02 $1.58
Dec01 $0.99
Dec00 $1.17
Dec99 $1.12
Dec98 $0.59
Dec97 $0.88
Dec96 $0.77
Dec95 $0.68

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.86
Dec14 $3.60
Dec13 $3.17
Dec12 $2.59
Dec11 $2.13
Dec10 $1.83
Dec09 $1.73
Dec08 $1.80
Dec07 $2.30
Dec06 $2.19
Dec05 $1.94
Dec04 $1.69
Dec03 $1.46
Dec02 $1.21
Dec01 $1.00
Dec00 $0.97
Dec99 $0.85

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – August 2015
The 12 Best Stocks For Value Investors This Week – 5/30/15
Wells Fargo Stock Analysis – May 2015 Quarterly Update $WFC
A Glimpse at the Banking Industry – May 2015
5 Most Undervalued Companies for the Defensive Investor – March 2015

Other ModernGraham posts about related companies

People’s United Financial Inc. Analysis – August 2015 Update $PBCT
M&T Bank Corporation Analysis – August 2015 Update $MTB
KeyCorp Analysis – August 2015 Update $KEY
State Street Corporation Analysis – August 2015 Update $STT
BB&T Corporation Analysis – August 2015 Update $BBT
PNC Financial Services Group Inc. Analysis – August 2015 Update $PNC
US Bancorp Analysis – August 2015 Update $USB
Comerica Incorporated Analysis – July 2015 Update $CMA
Starwood Property Trust Inc. Analysis – Initial Coverage $STWD
Fifth Third Bancorp Analysis – July 2015 Update $FITB

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please review our detailed disclaimer.

Wells Fargo Stock Analysis – May 2015 Quarterly Update $WFC

500px-Wells_Fargo_Bank.svgWells Fargo (WFC) currently yields about a 2.7% dividend, and has grown its earnings well over the last few years. In addition, multiple analysts believe the company has potential to rise in price once the Fed raises interest rates. For example, both Individual Trader and Josh Arnold recently wrote that based on the strong margins the company sees today, the company stands to gain significantly as the U.S. economy continues to move towards higher interest rates.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of a Wells Fargo stock analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

WFC Chart

WFC data by YCharts

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Defensive Investor – Must pass all 6 of the following tests: Score = 6/6

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  5. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – PASS
  6. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass all 3 of the following tests or be suitable for a Defensive Investor: Score = 3/3

  1. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  2. Dividend Record – Currently pays a dividend – PASS
  3. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $56.01
MG Value $120.76
MG Opinion Undervalued
Value Based on 3% Growth $54.96
Value Based on 0% Growth $32.22
Market Implied Growth Rate 3.14%
PEmg 14.78
PB Ratio 1.56

Balance Sheet – March 2015

Total Debt $183,292,000,000
Total Assets $1,737,730,000,000
Intangible Assets $38,696,000,000
Total Liabilities $1,548,940,000,000
Outstanding Shares 5,243,600,000

Earnings Per Share

2015 (estimate) $3.85
2014 $4.10
2013 $3.89
2012 $3.36
2011 $2.82
2010 $2.21
2009 $1.75
2008 $0.70
2007 $2.38
2006 $2.47
2005 $2.25

Earnings Per Share – ModernGraham

2015 (estimate) $3.79
2014 $3.60
2013 $3.17
2012 $2.59
2011 $2.13
2010 $1.83

Dividend History

WFC Dividend Chart

WFC Dividend data by YCharts

Conclusion

Wells Fargo passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, the company passes every requirement of both investor types, which is a rare accomplishment indicative of the company’s strong financial position. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $2.13 in 2011 to an estimated $3.79 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of 3.14% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 15.6% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Wells Fargo is significantly undervalued at the present time.

Disclaimer:  The author did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Wells Fargo & Company Quarterly Valuation – February 2015 $WFC

500px-Wells_Fargo_Bank.svg

Wells Fargo & Co. passes the initial requirements of the Enterprising Investor as well as the more conservative Defensive Investor. In fact, the company passes all of the requirements of both investor types, which is a rare accomplishment. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.83 in 2010 to $3.60 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 3.37% over the next 7-10 years. In fact, the historical growth is around 19.4% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Wells Fargo & Company (WFC) for greater perspective!

Read the full valuation on Seeking Alpha!

WFC Chart

WFC data by YCharts

Disclaimer:  The author did not hold a position in Wells Fargo & Company (WFC) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Wells Fargo and Company Quarterly Valuation – November 2014 $WFC

500px-Wells_Fargo_Bank.svg

Wells Fargo performs extremely well in the initial stages of the analysis, passing all of the requirements of both the Enterprising Investor and the Defensive Investor. Any value investor following the ModernGraham approach based on Benjamin Graham’s teachings should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

To determine an estimate of the intrinsic value, one must consider the company’s earnings. Wells Fargo has grown its EPSmg (normalized earnings) from $1.83 in 2010 to an estimated $3.58 for 2014. This is a high level of growth, approximately 19.25% each year. Even adjusting for a margin of safety to assume the company will not do as well in the future, a conservative growth estimate may be around 14.4%, which is well above the market’s implied forecast of only 3.19% earnings growth over the next 7-10 years. The company would have to see a significant slowdown in growth in order to be valued at the market’s current price. As a result, the ModernGraham valuation model returns an estimate of intrinsic value well above the price, supporting a clear conclusion that the company is significantly undervalued. All value investors are therefore encouraged to proceed with further research to determine whether Wells Fargo is suitable for their own individual portfolios.

Be sure to check out previous ModernGraham valuations of Wells Fargo & Company for better perspective.

Read the full valuation on Seeking Alpha!

WFC Chart

WFC data by YCharts

Wells Fargo and Company Quarterly Valuation – July 2014 $WFC

500px-Wells_Fargo_Bank.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Wells Fargo and Company (WFC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wells Fargo & Company is a bank holding company. The Company is a diversified financial services company. It has three operating segments: Community Banking, Wholesale Banking and Wealth, and Brokerage and Retirement. The Company provides other financial services through subsidiaries engaged in various businesses, principally wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment. In May 2014, the Company announced that it has completed the sale of 40 of primarily smaller regional insurance brokerage and consulting locations.

WFC Chart

WFC data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 6/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $51.6
MG Value $131.54
MG Opinion Undervalued
Value Based on 3% Growth $51.61
Value Based on 0% Growth $30.25
Market Implied Growth Rate 3.00%
PEmg 14.50
PB Ratio 1.55

Balance Sheet – 3/31/2014

Total Debt $153,422,000,000
Total Assets $1,546,707,000,000
Intangible Assets $41,809,000,000
Total Liabilities $1,371,053,000,000
Outstanding Shares 5,265,730,000

Earnings Per Share

2014 (estimate) $3.98
2013 $3.89
2012 $3.36
2011 $2.82
2010 $2.21
2009 $1.75
2008 $0.70
2007 $2.38
2006 $2.49
2005 $2.25
2004 $2.05

Earnings Per Share – ModernGraham 

2014 (estimate) $3.56
2013 $3.17
2012 $2.59
2011 $2.13
2010 $1.83
2009 $1.73

Dividend History
WFC Dividend Chart

WFC Dividend data by YCharts

Conclusion:

Wells Fargo qualifies for either Defensive Investors or for Enterprising Investors.  In fact, the company passes all of the requirements of both investor types, which is a rare accomplishment.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Fifth Third Bancorp (FITB) and ModernGraham’s valuation of JP Morgan Chase (JPM).  From a valuation perspective, the company appears significantly undervalued after growing its EPSmg (normalized earnings) from $1.83 in 2010 to an estimated $3.56 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 3.00% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the market price.

Be sure to check out the previous ModernGraham valuations of Wells Fargo and Company (WFC) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Wells Fargo and Company (WFC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Wells Fargo and Company (WFC) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

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