Wells Fargo & Company, a diversified financial services company, provides retail, commercial, and corporate banking services to individuals, businesses, and institutions. More info.
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.
Excess Returns = (Stable Return on equity – Cost of equity) (Book Value of Equity per share)
$1.19 = (12.71% – 9.79%) * $40.74)
Terminal Value of Excess Returns = Excess Returns / (Cost of Equity - Expected Growth Rate)
$16.23 = $1.19 / (9.79% - 2.47%)
Value of Equity = Book Value per share + Terminal Value of Excess Returns
$56.97 = $40.74 + $16.23Inputs used in model:
Stable EPS = Stable Book Value * Return on Equity
$5.18 = $40.74 * 12.71%
Source: Weighted future Return on Equity estimates from 19 analysts.
Book Value of Equity per Share: $40.74
Source: Weighted future Book Value estimates from 17 analysts.
Expected Growth Rate: 2.47%
Source: Risk Free Rate/ 10 year Government Bond Rate in USD.
Value per share:
Current discount (share price of $59.73): -4.84%
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 = 9.79% = 2.47% + (0.972 * 7.53%)
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 ($292,176,261,190).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.972 = 0.494 (1 + (1- 40%) (115.37%))
Levered Beta used in calculation = 0.972
This company is a bank or financial institution, which is analysed accordingly below.
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.
Average tenure and age of the Wells Fargo management team in years:
Average tenure and age of the Wells Fargo board of directors in years:
Today I will examine Wells Fargo & Company's (NYSE:WFC) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of WFC's industry performed. … See our latest analysis for Wells Fargo Did WFC's recent performance beat its trend and industry? … For Wells Fargo, its most recent bottom-line (trailing twelve month) is US$20.55B, which compared to the prior year's figure, Given that these values are fairly short-term thinking, I’ve calculated an annualized five-year value for Wells Fargo's earnings, which stands at US$19.28B This suggests that, generally, Wells Fargo has been able to increase its earnings over the past few years.Simply Wall St - – Full article
Looking at data points like book values, along with the return and cost of equity, may be useful for assessing WFC’s value. … The returns in excess of cost of equity is called excess returns: Excess Return Per Share = (Stable Return On Equity – Cost Of Equity) (Book Value Of Equity Per Share) = (12.75% – 9.78%) * $40.74 = $1.21 Excess Return Per Share is used to calculate the terminal value of WFC, which is how much the business is expected to continue to generate over the upcoming years, in perpetuity. … This is a common component of discounted cash flow models: Terminal Value Per Share = Excess Return Per Share / (Cost of Equity – Expected Growth Rate) = $1.21 / (9.78% – 2.47%) = $16.54 These factors are combined to calculate the true value of WFC's stock: Value Per Share = Book Value of Equity Per Share + Terminal Value Per Share = $40.74 + $16.54 = $57.28 Relative to the present share price of $64.07, WFC is , at this time, trading in-line with its true value.Simply Wall St - – Full article
See our latest analysis for Wells Fargo 5 checks you should do on a dividend stock Whenever I am looking at a potential dividend stock investment, I always check these five metrics: Is its annual yield among the top 25% of dividend-paying companies? … NYSE:WFC Historical Dividend Yield Jan 24th 18 How well does Wells Fargo fit our criteria? … In terms of its peers, Wells Fargo produces a yield of 2.42%, which is on the low-side for Banks stocks.Next Steps: With these dividend metrics in mind, I definitely rank Wells Fargo as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy.Simply Wall St - – Full article
Check out our latest analysis for Wells Fargo NYSE:WFC Historical Debt Jan 12th 18 Is WFC's Leverage Level Appropriate? … While financial companies will always have some leverage for a sufficient capital buffer, Wells Fargo’s leverage ratio of 9x is significantly below the appropriate ceiling of 20x. … Compared to the appropriate industry loan to deposit level of 90%, Wells Fargo’s ratio of over 72.00% is sensibly lower and within the safe margin, which places the bank in a relatively safe liquidity position given it has not excessively lent out its deposits and has maintained a suitable level for compliance.Final words Wells Fargo ticks all the boxes for operational prudency in terms of liquidity and leverage.Simply Wall St - – Full article
Wells Fargo & Company (NYSE:WFC) saw a decent share price growth in the teens level on the NYSE over the last few months. … This means that the opportunity to buy Wells Fargo at a good price has disappeared! … Wells Fargo’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value.Simply Wall St - – Full article
Check out our latest analysis for Wells Fargo Peeling the layers of ROE – trisecting a company’s profitability Firstly, Return on Equity, or ROE, is simply the percentage of last years’ earning against the book value of shareholders’ equity. … Return on Equity = Net Profit ÷ Shareholders Equity ROE is measured against cost of equity in order to determine the efficiency of Wells Fargo’s equity capital deployed. … This means Wells Fargo returns enough to cover its own cost of equity, with a buffer of 0.54%.Simply Wall St - – Full article
Since the level of risky assets held by a bank impacts its cash flow and therefore the attractiveness of its stock as an investment, I will take you through three metrics that are insightful proxies for risk. … Wells Fargo’s ability to forecast and provision for its bad loans indicates it has a good understanding of the level of risk it is taking on. … This indicates a prudent level of the bank's safer form of borrowing and a prudent level of risk.Final words Wells Fargo exhibits prudent management of risky assets and lending behaviour with sensible levels for all three ratios.Simply Wall St - – Full article
NYSE:WFC Historical Dividend Yield Nov 24th 17 BlackRock, Inc. … (NYSE:BLK) BLK has a solid dividend yield of 2.09% and the company currently pays out 45.29% of its profits as dividends. … NYSE:MET Historical Dividend Yield Nov 24th 17 For more solid dividend payers to add to your portfolio, you can use our free platform to explore our interactive list of top dividend payers.Simply Wall St - – Full article
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.
|Name:||Wells Fargo & Company|
Wells Fargo & Company
420 Montgomery Street,
|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|
|LSE||0R2F||Common Stock||London Stock Exchange||GB||USD||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.PRO||DEP1/1000PF CL A||New York Stock Exchange||US||USD||15. Nov 2012|
|NYSE||WFC.PRX||PFD SER X CL A||New York Stock Exchange||US||USD||10. Jun 2016|
|NYSE||WFC.PRW||PFD SER W CL A||New York Stock Exchange||US||USD||21. Jan 2016|
|NYSE||WFC.PRT||DEP SHS 1/1000 T||New York Stock Exchange||US||USD||17. Jul 2014|
|NYSE||WFC.PRQ||DEP SHS 1/1000 A||New York Stock Exchange||US||USD||16. Jul 2013|
|NYSE||WFC.PRN||DEP SHS REPSTG 1||New York Stock Exchange||US||USD||13. Aug 2012|
|NYSE||WFC.PRP||DEP1/1000PF CL A||New York Stock Exchange||US||USD||19. Mar 2013|
|NYSE||WFC.PRR||DEP 1/1000 PFD A||New York Stock Exchange||US||USD||13. Dec 2013|
|NYSE||WFC.PRV||DEP PFD V 1/1000||New York Stock Exchange||US||USD||10. Sep 2015|
|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|
|Company Analysis updated:||2018/02/22|
|Last estimates confirmation:||2018/02/21|
|Last earnings update:||2017/12/31|
|Last annual earnings update:||2017/12/31|
All dates in UTC. All financial data provided by Standard & Poor’s Capital IQ.
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.