Is Now the Time to Revisit Wells Fargo After Its Push to Streamline Operations?

• Wondering if Wells Fargo is actually a good deal right now? You’re definitely not alone. There’s more to the stock than just its recent price tag.
• The stock price has seen a 2.9% lift over the past week, but has slid slightly by 0.5% in the last month. Still, it’s up a striking 21.9% year-to-date, showing a pattern of recovery and renewed investor confidence.
• In recent weeks, headlines have highlighted Wells Fargo’s push to simplify its business operations and address longstanding legacy issues. These moves are being watched closely by analysts and investors. These developments are providing important context for the bank’s stock momentum and could play a role in shaping risk perceptions going forward.
• On our valuation scorecard, Wells Fargo earns a 3 out of 6 for being undervalued, which is solid but not spectacular. Next, we’ll break down the different ways you can value the stock and reveal why the most popular approaches might not always give you the full picture.

Wells Fargo delivered 14.8% returns over the last year. See how this stacks up to the rest of the Banks industry.

Approach 1: Wells Fargo Excess Returns Analysis

The Excess Returns model focuses on how much profit a company generates above the minimum required return for its shareholders. In essence, it measures the value created by Wells Fargo beyond its cost of equity, offering a clear view of whether the bank is using its capital effectively.

For Wells Fargo, the key figures are telling. The company’s book value per share is $52.25, with a stable Earnings Per Share (EPS) estimate of $7.29, based on projections from 17 analysts. The calculated cost of equity stands at $4.60 per share, meaning Wells Fargo generates an excess return of $2.68 per share. The bank’s average return on equity is a healthy 12.98%, and the stable book value is expected to reach $56.11, according to consensus long-term estimates.

Based on this model, the intrinsic value suggests the stock is trading at a 22.5% discount to fair value. This significant gap points to Wells Fargo being undervalued when considering its ability to generate above-average returns on invested capital compared to its cost of equity.

Result: UNDERVALUED

Our Excess Returns analysis suggests Wells Fargo is undervalued by 22.5%. Track this in your watchlist or portfolio, or discover 923 more undervalued stocks based on cash flows.

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

Approach 2: Wells Fargo Price vs Earnings

For profitable companies like Wells Fargo, the Price-to-Earnings (PE) ratio is a tried-and-true valuation metric. It reveals how much investors are willing to pay for each dollar of the company’s earnings and is especially helpful for established, consistently earning banks. A “normal” or fair PE ratio is influenced by expectations for future growth as well as the risks surrounding those earnings. Companies with higher expected growth or lower risk tend to command higher multiples.

Wells Fargo currently trades at a PE ratio of 13.45x. Compared to its peer average of 12.68x and the wider banks industry average of 11.40x, Wells Fargo’s multiple is a bit higher but still comfortably in range for a large, stable lender. These small differences usually reflect subtle variations in expected growth rates, profit margins, or risk profiles, and can signal how the market perceives Wells Fargo versus its rivals.

Simply Wall St’s Fair Ratio for Wells Fargo is calculated at 14.08x. This proprietary metric is designed to be more insightful than simple peer or industry comparisons, as it factors in the company’s expected earnings growth, risks, profit margins, industry norms, and market capitalization. By incorporating these elements, the Fair Ratio offers a tailored benchmark for what investors should expect to pay for Wells Fargo’s earnings in today’s market.

Based on this analysis, Wells Fargo’s current PE ratio of 13.45x sits just below its Fair Ratio of 14.08x, suggesting the stock is trading at a valuation that is about right, given its growth prospects and risk profile.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1439 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 us introduce you to Narratives.

A Narrative is your personal story about a company that connects what you believe about its future, such as its revenue growth, profit margins, or risks, to a set of financial forecasts and an estimated fair value.

On Simply Wall St’s platform, used by millions of investors, Narratives can easily be explored or built through the Community page. This allows you to see how your view or someone else's aligns with the numbers behind the stock.

Narratives help you decide when to buy or sell by comparing each Narrative’s Fair Value with the current share price, updating automatically as news, earnings reports, or new data come in. This keeps your perspective fresh and actionable.

For example, while some investors see Wells Fargo’s Fair Value as high as $93.54, based on robust fee growth and improved profitability, others see a Fair Value closer to $72.00, factoring in sector headwinds and competitive risk. The Narrative you choose lets you act confidently on the scenario you believe most.

For Wells Fargo, here are previews of two leading Wells Fargo Narratives:

🐂 Wells Fargo Bull Case

Fair Value: $93.54

Current price is 8.53% below fair value

Projected revenue growth: 7.01%

• Regulatory restrictions have been lifted, which allows Wells Fargo to expand its balance sheet and diversify revenue across deposits, lending, and wealth management.
• Investments in digital banking, technology, and expense discipline may improve margins, customer satisfaction, and long-term earnings potential.
• Analysts forecast steady revenue and earnings growth, but identify potential risks from competition, the pace of digital transformation, and evolving consumer behavior.

🐻 Wells Fargo Bear Case

Fair Value: $74.70

Current price is 14.54% above fair value

Projected revenue growth: 3.0%

• Wells Fargo's stock appears undervalued based on its lower price-to-earnings ratio compared to the market, though some anticipate modest growth.
• The bank faces challenges from slow economic sectors, but it benefits from a large customer base, low funding costs, and a possible end to growth limits imposed by regulators.
• Strategic investments and strong fundamentals may support future profitability, but realization depends on broader economic improvements and regulatory changes.

Do you think there's more to the story for Wells Fargo? Head over to our Community to see what others are saying!

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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