What Does Wells Fargo & Company’s (WFC) Share Price Indicate?
Today we’re going to take a look at the well-established Wells Fargo & Company (NYSE:WFC). The company’s stock received a lot of attention from a substantial price movement on the NYSE in the over the last few months, increasing to $56.48 at one point, and dropping to the lows of $49.58. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether WFC’s current trading price of $53.95 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 WFC’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for WFC
Is WFC still cheap?
According to my valuation model, the stock is currently overvalued by about 39%, trading at $53.95 compared to my intrinsic value of $38.71. This means that the opportunity to buy WFC at a good price has disappeared! Another thing to keep in mind is that WFC’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will WFC generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by a double-digit 11.45% over the next couple of years, the outlook is positive for WFC. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in WFC’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe WFC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on WFC for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for WFC, which means it’s worth diving deeper into other factors 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 WFC 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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
