Wells Fargo & Company’s (NYSE:WFC) Earnings Declined -4.2%, But How Did It Fare Against The Industry?
Assessing Wells Fargo & Company’s (NYSE:WFC) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess WFC’s recent performance announced on 30 September 2017 and evaluate these figures to its longer term trend and industry movements. View our latest analysis for Wells Fargo
Was WFC’s weak performance lately a part of a long-term decline?
I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method enables me to assess many different companies on a similar basis, using new information. Wells Fargo’s latest earnings is $19,517.0M, which, relative to the prior year’s figure, has fallen by -5.73%. Since these figures may be relatively short-term thinking, I have determined an annualized five-year figure for Wells Fargo’s earnings, which stands at $18,963.4M. This suggests that while earnings growth was negative from the prior year, over the past couple of years, Wells Fargo’s earnings have been rising on average.
What’s enabled this growth? Let’s see whether it is only because of an industry uplift, or if Wells Fargo has experienced some company-specific growth. In the last few years, Wells Fargo grew its bottom line faster than revenue by efficiently controlling its costs. This has caused a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US banks industry has been growing, albeit, at a subdued single-digit rate of 9.80% over the prior year, and 8.99% over the past five. This suggests that any tailwind the industry is benefiting from, Wells Fargo has not been able to gain as much as its average peer.
What does this mean?
Wells Fargo’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies are profitable, but have volatile earnings, can have many factors affecting its business. You should continue to research Wells Fargo to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for WFC’s future growth? Take a look at our free research report of analyst consensus for WFC’s outlook.
2. Financial Health: Is WFC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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.
