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Wells Fargo

NYSE:WFC
Snowflake Description

Flawless balance sheet average dividend payer.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
WFC
NYSE
$268B
Market Cap
  1. Banks
Company description

Wells Fargo & Company, a diversified financial services company, provides retail, commercial, and corporate banking services to individuals, businesses, and institutions. More info.


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3 Month History
WFC
Industry
5yr Volatility vs Market

Value

 Is Wells Fargo undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Wells Fargo to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Wells Fargo is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Wells Fargo's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Wells Fargo's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Wells Fargo is good value based on earnings compared to the US Banks industry average.
  • Wells Fargo is good value based on earnings compared to the US market.
Price based on expected Growth
Does Wells Fargo's expected growth come at a high price?
  • Wells Fargo is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Wells Fargo's assets?
  • Wells Fargo is good value based on assets compared to the US Banks industry average.
X
Value checks
We assess Wells Fargo's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Banks industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Banks industry average (and greater than 0)? (1 check)
  5. Wells Fargo has a total score of 3/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (7.73%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (Excess Returns Model)

The calculations below outline how an intrinsic value for Wells Fargo is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.

In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.

The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.

Note the calculations below are per share.

See our documentation to learn about this calculation.



Value of Excess Returns

Excess Returns = (Stable Return on equity – Cost of equity) (Book Value of Equity per share)

$-0.04 = (11.17% – 11.27%) * $39.15)

Terminal Value of Excess Returns = Excess Returns / (Cost of Equity - Expected Growth Rate)

$-0.44 = $-0.04 / (11.27% - 2.47%)

Value of Equity = Book Value per share + Terminal Value of Excess Returns

$38.71 = $39.15 + $-0.44

Inputs used in model:

Stable EPS = Stable Book Value * Return on Equity
$4.37 = $39.15 * 11.17%
Source: Weighted future Return on Equity estimates from 21 analysts.

Book Value of Equity per Share: $39.15
Source: Weighted future Book Value estimates from 18 analysts.

Expected Growth Rate: 2.47%
Source: Risk Free Rate/ 10 year Government Bond Rate in USD.

Discount to Share Price

Value per share:
$38.71

Current discount (share price of $54.06): -39.67%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 11.27% = 2.47% + (1.168 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($268,470,734,199).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

1.168 = 0.58 (1 + (1- 30%) (127.46%))

Levered Beta used in calculation = 1.168



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Wells Fargo expected to perform in the next 1 to 3 years based on estimates from 21 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
5%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Wells Fargo expected to grow at an attractive rate?
  • Wells Fargo's earnings growth is expected to exceed the low risk savings rate of 3.6%.
Growth vs Market Checks
  • Wells Fargo's earnings growth is positive but not above the US market average.
  • Wells Fargo's revenue growth is positive but not above the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Wells Fargo's earnings are expected to grow by 5% yearly, however this is not considered high growth (20% yearly).
  • Wells Fargo's revenue is expected to grow by 2.5% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Wells Fargo is not expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be below 20%.

Improvement & Relative to industry
  • Performance (ROE) is expected to be above the current US Banks industry average.
  • An improvement in Wells Fargo's performance (ROE) is expected over the next 3 years.
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Future performance checks
We assess Wells Fargo's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Wells Fargo has a total score of 1/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Wells Fargo performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Wells Fargo's growth in the last year to its industry (Banks).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Wells Fargo's year on year earnings growth rate has been positive on average over the past 5 years.
  • Wells Fargo's 1 year earnings growth is negative, it can't be compared to the 5 year average.
  • Wells Fargo's 1 year earnings growth is negative, it can't be compared to the US Banks industry average.
Earnings and Revenue History
Wells Fargo's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Poor return on shareholders funds (ROE < 20%) last year.
  • Wells Fargo performed above the US Banks industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has been diminishing over 3 years.
X
Past performance checks
We assess Wells Fargo's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Banks industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Wells Fargo has a total score of 2/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Wells Fargo's financial position? (This company is analysed differently as a bank or financial institution)

This company is a bank or financial institution.

Fundamentally a bank's business is based upon borrowing and lending money, for this reason they typically have high levels of debt and we analyse them differently.
Net Worth
Balance sheet
This treemap shows a more detailed breakdown of Wells Fargo's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
BANK ANALYSIS

This company is a bank or financial institution, which is analysed accordingly below.

Below we check the amount of loans the bank has, how many of those are bad, and its ability to cover any bad loans.
  • Acceptable proportion of non-loan assets held.
  • Liabilities are made up of primarily low risk sources of funding.
  • Loans are broadly funded by customer deposits.
  • Wells Fargo's level of assets compared to its equity is low (i.e. an appropriate level of borrowing to fund lending).
  • High level of bad loan coverage.
  • Acceptable level of bad loans (less than 2%).
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Financial health checks
We assess Wells Fargo's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Wells Fargo has a total score of 6/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Wells Fargo's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
2.89%
Current annual income from Wells Fargo dividends. Estimated to be 3% next year.
If you bought $2,000 of Wells Fargo shares you are expected to receive $1 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Paying above low risk savings rate (2.25%).
  • Paying below markets top dividend payers (3.18%).
Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Dividends per share have been volatile in the past 10 years (annual drop of over 20%).
  • Dividends per share have increased over the past 10 years.
Current Payout to shareholders
What portion of Wells Fargo's earnings are paid to the shareholders as a dividend.
  • Dividends paid are well covered by net profit (2.6x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be well covered by net profit (2.7x coverage).
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Income/ dividend checks
We assess Wells Fargo's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Wells Fargo afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Wells Fargo has a total score of 4/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Wells Fargo's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Tim Sloan, image provided by Google.
Tim Sloan
COMPENSATION $13,014,714
AGE 56
TENURE AS CEO 1.1 years
CEO Bio

Mr. Timothy J. Sloan, also known as Tim, has been the Chief Executive Officer of Wells Fargo & Company since October 12, 2016 and as its President since November 17, 2015. Mr. Sloan served as the Chief Operating Officer at Wells Fargo & Company from November 17, 2015 to October 12, 2016. He served as the Head of Wholesale Banking and Senior Executive Vice President of Wholesale Banking at Wells Fargo & Company since May 15, 2014. He served as Head of Wholesale Banking and Senior Executive Vice President of Wholesale Banking at Wells Fargo Bank, National Association. Mr. Sloan was the Chief Financial Officer and Executive Vice President at Wells Fargo Bank, National Association. He served as the of Senior Executive Vice President of Wells Fargo & Company from February 8, 2011 to May 15, 2014. Mr. Sloan served as the Chief Financial Officer and Senior Executive Vice President for Wachovia Preferred Funding Corp. since February 23, 2011. He was Executive Vice President (Commercial Banking, Real Estate and Specialized Financial Services) of Wells Fargo Bank, N.A. from 2006 to 2010 He served as the Chief Administrative Officer of Wells Fargo & Company from September 3, 2010 to February 8, 2011. He served as an Executive Vice President of Wachovia Preferred Funding Corp. since February 23, 2011. He served as the Head of Commercial Banking Real Estate & Specialized Financial Services at Wells Fargo & Company. He served as the Head of Specialized Financial Services for Wells Fargo & Company. He served as an Executive Vice President of Wholesale Banking with Wells Fargo Bank, National Association, from August 2003 to September 2010. Mr. Sloan joined Wells Fargo in 1987. Mr. Sloan has been a Director of Wells Fargo & Company since October 12, 2016. He served as an Independent Director of California Resources Corporation since December 1, 2014 until February 28, 2017. Mr. Sloan serves on the Board of Overseers of the Huntington Library and is a member of the University of Michigan's Ross School of Business Advisory Board. He is a trustee of Ohio Wesleyan University and the City of Hope. Mr. Sloan holds a B.A. in Economics and History and an M.B.A. in Finance and Accounting from the University of Michigan.

CEO Compensation
  • Tim's compensation has been consistent with company performance over the past year.
  • Tim's compensation appears reasonable.
Management Team Tenure

Average tenure and age of the Wells Fargo management team in years:

2.6
Average Tenure
59.7
Average Age
  • The tenure for the Wells Fargo management team is about average.
Management Team

Tim Sloan

TITLE
CEO, President & Director
COMPENSATION
$13M
AGE
56
TENURE
1.1 yrs

John Shrewsberry

TITLE
CFO & Senior EVP
COMPENSATION
$9M
AGE
51
TENURE
3.5 yrs

Avid Modjtabai

TITLE
Senior Executive Vice President of Payments
COMPENSATION
$9M
AGE
55
TENURE
1 yrs

Mike Loughlin

TITLE
Chief Risk Officer and Senior Executive Vice President
COMPENSATION
$5M
AGE
61
TENURE
6.3 yrs

Titi Cole

TITLE
Head of Operations and Executive Vice President
TENURE
0.6 yrs

Joseph Zawistowski

TITLE
Senior Vice President for Investments
TENURE
4.1 yrs

Scott Dillon

TITLE
Chief Technology Officer
TENURE
1.8 yrs

Hope Hardison

TITLE
Chief Administrative Officer
AGE
52
TENURE
2.2 yrs

John Campbell

TITLE
Director of Investor Relations
AGE
83
TENURE
0.2 yrs

Yvette Hollingsworth

TITLE
Chief Compliance Officer
TENURE
5.4 yrs
Board of Directors Tenure

Average tenure and age of the Wells Fargo board of directors in years:

8.4
Average Tenure
65.3
Average Age
  • The tenure for the Wells Fargo board of directors is about average.
Board of Directors

Steve Sanger

TITLE
Non-Executive Chairman
COMPENSATION
$486K
AGE
71
TENURE
1.1 yrs

Tim Sloan

TITLE
CEO, President & Director
COMPENSATION
$13M
AGE
56
TENURE
1.1 yrs

Betsy Duke

TITLE
Vice Chair
COMPENSATION
$386K
AGE
64
TENURE
1.1 yrs

Henry Jordan

TITLE
Chairman of Wells Fargo Capital Finance and Chief Executive Officer of Wells Fargo Capital Finance
AGE
61

Cynthia Milligan

TITLE
Independent Director
COMPENSATION
$377K
AGE
71
TENURE
25.8 yrs

Rick Hernandez

TITLE
Independent Director
COMPENSATION
$421K
AGE
61
TENURE
14.8 yrs

Lloyd Dean

TITLE
Independent Director
COMPENSATION
$376K
AGE
66
TENURE
12.4 yrs

Don James

TITLE
Independent Director
COMPENSATION
$326K
AGE
68
TENURE
8.8 yrs

Federico Peña

TITLE
Independent Director
COMPENSATION
$386K
AGE
70
TENURE
6 yrs

Jim Quigley

TITLE
Independent Director
COMPENSATION
$429K
AGE
65
TENURE
4.1 yrs
Recent Insider Trading
  • No 3 month insider trading information.
Who owns this company?
X
Management checks
We assess Wells Fargo's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Wells Fargo has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

Wells Fargo & Company, a diversified financial services company, provides retail, commercial, and corporate banking services to individuals, businesses, and institutions. Its Community Banking segment offers checking, savings, market rate, and individual retirement accounts, as well as time deposits and remittances; and lines of credit, automobile floor plan lines, equity lines and loans, equipment and transportation loans, education and residential mortgage loans, and debit and credit cards. This segment also provides equipment leases, real estate and other commercial financing, small business administration financing, venture capital financing, cash management, payroll services, retirement plans, merchant payment processing, and private label financing solutions, as well as purchases retail installment contracts. Its Wholesale Banking segment offers commercial loans and lines of credit, letters of credit, asset-based lending, equipment leasing, international trade facilities, trade financing, collection, foreign exchange, treasury management, institutional fixed-income sales, commodity and equity risk management, insurance, corporate trust fiduciary and agency, and investment banking services, as well as online/electronic products. This segment also provides construction, and land acquisition and development loans; secured and unsecured lines of credit; interim financing arrangements; rehabilitation loans; affordable housing loans and letters of credit; loans for securitization; and real estate and mortgage brokerage services. The company’s Wealth and Investment Management segment offers financial planning, private banking, credit, and investment management and fiduciary services, as well as retirement and trust services. It serves clients through approximately 8,600 locations and 13,000 ATMs; online and mobile banking; and offices in 42 countries. Wells Fargo & Company was founded in 1852 and is headquartered in San Francisco, California.

Details
Name: Wells Fargo & Company
Ticker: WFC
Exchange: NYSE
Founded: 1852
Market Cap: $268,470,734,199
Shares outstanding: 4,924,261,449
Website: http://www.wellsfargo.com
Address: Wells Fargo & Company
420 Montgomery Street,
San Francisco,
California, 94163,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NYSE WFC Common Stock New York Stock Exchange US USD 02. Jan 1968
DB NWT Common Stock Deutsche Boerse AG DE EUR 02. Jan 1968
XTRA NWT Common Stock XETRA Trading Platform DE EUR 02. Jan 1968
SWX WFC Common Stock SIX Swiss Exchange CH CHF 02. Jan 1968
SNSE WFC Common Stock Santiago Stock Exchange CL USD 02. Jan 1968
BMV WFC * Common Stock Bolsa Mexicana de Valores MX MXN 02. Jan 1968
NYSE WFC.PRL PERP PFD CNV A New York Stock Exchange US USD 15. Apr 2008
NYSE WFC.PRJ DEP SHS SER J New York Stock Exchange US USD 20. Dec 2007
NYSE WFC.PRN DEP SHS REPSTG 1 New York Stock Exchange US USD 13. Aug 2012
NYSE WFC.PRO DEP1/1000PF CL A New York Stock Exchange US USD 15. Nov 2012
NYSE WFC.PRP DEP1/1000PF CL A New York Stock Exchange US USD 19. Mar 2013
NYSE WFC.PRQ DEP SHS 1/1000 A New York Stock Exchange US USD 16. Jul 2013
NYSE WFC.PRR DEP 1/1000 PFD A New York Stock Exchange US USD 13. Dec 2013
NYSE WFC.PRT DEP SHS 1/1000 T New York Stock Exchange US USD 17. Jul 2014
NYSE WFC.PRV DEP PFD V 1/1000 New York Stock Exchange US USD 10. Sep 2015
NYSE WFC.PRW PFD SER W CL A New York Stock Exchange US USD 21. Jan 2016
NYSE WFC.PRX PFD SER X CL A New York Stock Exchange US USD 10. Jun 2016
NYSE WFC.PRY NON CUM PFD Y New York Stock Exchange US USD 18. Apr 2017
BOVESPA WFCO34 BDR EACH REPR 1 COM SH Bolsa de Valores de Sao Paulo BR BRL 03. Jan 2012
BASE WFC CEDEAR EACH 5 REP 1 COM USD1.666666 Buenos Aires Stock Exchange AR ARS 26. Jul 2001
DB NWT2 7.98%-FR PERP PRF CL 'A' SRS K USD1000 Deutsche Boerse AG DE USD 08. Jan 2009
Number of employees
Current staff
Staff numbers
268,000
Wells Fargo employees.
Industry
Industry: Diversified Banks
Sector: Banks