Wells Fargo & Company (WFC) stock analysis

P/E below its 5-year median

Wells Fargo &'s P/E of 12.1 is below its own 5-year median of 12.1.

P/E above the industry

Wells Fargo &'s P/E of 12.1 is above the Commercial Banks median of 12.1.

P/S below the industry

Wells Fargo &'s price-to-sales of 2.95 is below the Commercial Banks median of 3.60.

P/B above the industry

Wells Fargo &'s price-to-book of 1.47 is above the Commercial Banks median of 1.29.

Trading above fair value

The share price of $85.80 is above our fair value estimate of $78.15.

Margin of safety under 20%

The price is 9.8% above fair value, so there is no margin of safety.

Revenue growing under 10% a year

Revenue grew 4.0% a year over the last three fiscal years, short of the 10% we look for.

EPS growing 10%+ a year

Diluted EPS grew 24.2% a year over the last three fiscal years.

Earnings growth not accelerating

Net income grew 9.1% over the last twelve months, against a 5-year average of 44.6% a year.

Growing slower than the industry

Revenue grew 5.4% over the last twelve months; the Commercial Banks median is 11.3%.

Company guidance

No outlook found in earnings releases from the last twelve months.

Gross margin trend

Banks and insurers do not report gross profit.

Return on equity under 15%

Return on equity was 12.9% over the last twelve months and averaged 10.5% over five years; we look for 15% on both.

Return on assets over 1%

Return on assets was 1.1%; for a bank or insurer, 1% or more is considered good.

Return on equity above the industry

Wells Fargo &'s return on equity of 12.9% is above the Commercial Banks median of 11.5%.

Earnings grew over 5 years

Net income grew 44.6% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 26.3% over the last twelve months, against a 5-year average of 23.8%.

Net margin below the industry

Wells Fargo &'s net margin of 26.3% is below the Commercial Banks median of 30.3%.

Thin capital

Equity is 7.8% of total assets; 8% or more is a comfortable cushion.

Loans funded by deposits

Needs loans and deposits.

Adequate loan-loss reserve

The allowance for credit losses is not reported.

High cost base

Non-interest expense takes 63.6% of revenue; under 60% is efficient for a bank.

Deposits growing

Deposits grew 9.9% over the past year.

Modest borrowings

Borrowings other than deposits are 21.7% of equity.

Pays a dividend

Wells Fargo & paid dividends worth 1.6% of the share price over the last twelve months.

Yield below Treasuries

The 1.6% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Wells Fargo & yields 1.6%.

Dividend was cut

The dividend per share fell by more than 10% at least once in the last 10 fiscal years.

Covered by earnings

Dividends take 24.6% of net income.

Cash-flow cover

Needs dividends paid and free cash flow.