Is Now the Moment to Revisit Wells Fargo After Big Bank IPO Competition News?

If you are holding Wells Fargo stock or considering a buy, you are definitely not alone in wondering whether now is the moment to get in, cash out, or just hang tight. The stock price has proved it knows how to run, with a five-year return of 267.8% and an eye-catching 118.4% gain over the last three years. Most recently, though, the pace has cooled a bit, with a dip of 3.2% in the past week, but still a respectable climb of 2.8% over the last month. Year to date, shares are up 15.6%, supporting the narrative that the long-term transformation at Wells Fargo continues to catch investor interest.

Some of the recent swings may connect to anticipation around big banking deals, like the competition for spots in the massive Fannie Mae and Freddie Mac IPOs, which has put the spotlight squarely on major banks like Wells Fargo. There is also buzz about Wells making strategic moves in their card division which, while more of a long-term growth story, adds to the sense that management is chasing new ways to drive value. When you see a one-year gain of 44.8%, it is natural to ask whether that momentum still reflects a bargain or if the stock has gotten ahead of itself.

Our first stop will be a by-the-numbers valuation checkup. Wells Fargo scores 2 out of 6 on our value checklist, meaning it is currently undervalued in two of six common measures. But numbers only tell part of the story. Let’s dig into what these valuation methods really reveal, and why the best insights might come from looking beyond traditional models altogether.

Wells Fargo scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Wells Fargo Excess Returns Analysis

The Excess Returns model analyzes how much profit a company generates above its cost of equity, focusing on return on invested capital rather than just future cash flows. This approach evaluates whether management is putting shareholder funds to work efficiently, and what sustainable profits can be expected over time.

For Wells Fargo, the Excess Returns model uses a book value of $51.08 per share and a stable earnings-per-share (EPS) estimate of $6.84. These figures are informed by forward-looking Return on Equity (ROE) estimates from a panel of 17 analysts, with the average ROE coming in at 12.39%. The model calculates a cost of equity of $4.52 per share, meaning the company is expected to generate an annual excess return of $2.31 per share. Supported by a stable book value projection of $55.14 per share, based on 14 analyst forecasts, this sets a robust foundation for the intrinsic value calculation.

Based on the Excess Returns valuation, Wells Fargo’s intrinsic value stands at $100.27 per share. With the current share price roughly 19.1% below this estimate, the stock screens as undervalued using this method.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Wells Fargo.

Our Excess Returns analysis suggests Wells Fargo is undervalued by 19.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Wells Fargo Price vs Earnings

For profitable companies like Wells Fargo, the price-to-earnings (PE) ratio is a time-tested metric for gauging valuation. The PE ratio essentially tells you how much investors are willing to pay for each dollar of earnings, providing a quick snapshot of how the market values the company’s profit potential. Typically, faster-growing or lower-risk businesses warrant a higher PE ratio, while slower growth or higher risk pulls it down. This makes the context behind the number crucial.

Wells Fargo currently trades at a PE ratio of 13.3x. This stacks up closely against both the peer average of 13.1x and the broader banking industry average of 11.7x. However, looking at these simple averages can be misleading, as not all banks have the same growth prospects, risk profiles, or margins. This is where Simply Wall St’s proprietary “Fair Ratio” steps in. It combines Wells Fargo’s earnings growth outlook, profitability, risk level, industry trends, and market cap into a single benchmark, which for Wells Fargo is 15.4x.

By using the Fair Ratio, investors get a tailored benchmark that reflects Wells Fargo’s unique circumstance rather than just lumping it in with peers. The current PE ratio of 13.3x sits notably below the Fair Ratio, suggesting the shares may be undervalued using this lens.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Wells Fargo Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a powerful yet accessible tool that lets you express the story behind your numbers, connecting your view of a company’s future with assumptions for fair value, revenue growth, earnings, and margins.

Instead of focusing solely on traditional ratios, Narratives link Wells Fargo’s unique business story directly to a financial forecast and a personalized valuation. Through Simply Wall St’s Community page, used by millions of investors, you can explore and share Narratives, making sophisticated analysis easy for everyone.

Narratives help you make smarter buy or sell decisions by comparing your own fair value estimate to the current market price, and are dynamically updated as new news or earnings come in, so your insights always reflect the latest developments.

For example, some investors may see Wells Fargo’s fair value as low as $74.70 based on cautious growth forecasts, while others project it as high as $89.13, thanks to expectations for digital expansion and margin improvements. Whichever story you believe, Narratives put your perspective front and center in your decision making.

For Wells Fargo, we'll make it really easy for you with previews of two leading Wells Fargo Narratives:

🐂 Wells Fargo Bull Case

Fair Value: $89.13

Current undervaluation: 8.96%

Projected revenue growth: 5.44%

• Regulatory restrictions have been lifted, enabling Wells Fargo to grow its balance sheet and diversify revenue across deposits, lending, and wealth management.
• Strategic digital initiatives and investments in technology are driving scalable growth, cost efficiencies, and improved customer satisfaction. These factors support long-term competitiveness.
• Analysts expect steady revenue and earnings growth. A strong focus on wealth management expansion and disciplined expense management is likely to result in higher margins and more resilient earnings.

🐻 Wells Fargo Bear Case

Fair Value: $74.70

Current overvaluation: 8.60%

Projected revenue growth: 3.0%

• Wells Fargo's stock appears undervalued versus the market, but only modest revenue (1.2% in 2025) and earnings (6.6%) growth is anticipated. This suggests a slow recovery.
• Regulatory limits and a sluggish environment across housing and manufacturing continue to weigh on near-term prospects, despite the bank's cost advantages and broad customer base.
• Opportunities exist if regulatory caps are lifted and the economic outlook improves, but near-term risks and conservative valuation assumptions point to limited upside for now.

Do you think there's more to the story for Wells Fargo? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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