Let's talk about the popular Wells Fargo & Company (NYSE:WFC). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $51.73 at one point, and dropping to the lows of $46.49. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Wells Fargo's current trading price of $47.26 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Wells Fargo’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Wells Fargo?
According to my valuation model, Wells Fargo seems to be fairly priced at around 9.9% below my intrinsic value, which means if you buy Wells Fargo today, you’d be paying a fair price for it. And if you believe the company’s true value is $52.46, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Wells Fargo’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Wells Fargo generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 2.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Wells Fargo, at least in the short term.
What this means for you:
Are you a shareholder? WFC’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on WFC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Wells Fargo. You can find everything you need to know about Wells Fargo in the latest infographic research report. If you are no longer interested in Wells Fargo, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.