Money Tree Portfolio: Investing In Wells Fargo (WFC)

By | October 1, 2013

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Company Profile: Wells Fargo Co. is engaged in the financial services industry providing banking, insurance, investments, mortgages, commercial banking, and consumer finance. WFC has branches all over the United states with branches in the 50 states, Canada, the Caribbean, and Central America. Wells Fargo is divided into three business segments: Community Banking (the typical banking and mortgage services), Wholesale Banking (commercial banking, capital markets, and leasing), and Wealth, Brokerage and Retirement Advisory Services. Based $1.4 trillion in assets, loans of $750 billion, and stockholders equity of $157 billion, WFC is the third largest bank in the US.

wellsfargo

Key Financials:

Market Cap (intraday)5: 220.30B
Enterprise Value (Oct 1, 2013)3: 178.38B
Trailing P/E (ttm, intraday): 11.24
Forward P/E (fye Dec 31, 2014)1: 10.37
PEG Ratio (5 yr expected)1: 1.49
Price/Sales (ttm): 2.71
Price/Book (mrq): 1.46
Enterprise Value/Revenue (ttm)3: 2.2
Enterprise Value/EBITDA (ttm)6: N/A

Why Buy?wells-fargo-logo

Wells Fargo has rebounded better than most of its larger competitors (Bank of America and Citi to name a few), Total revenues has remained steady for the past 3 years 2010-2013, but COGS has decreased as the company is trying to save on costs and improve profit margins. Earnings per share has also risen steadily after the financial crisis, and with improvement in its equity ratios, can support a dividend increase upon regulatory approval. WFC is a solid company with a conservative culture and cautious position in the capital markets. It has remained relatively unscathed from the financial crisis because of its lack of exposure to subprime mortgages (had they been more aggressive, there would have been huge losses from bad assets). Wells Fargo also a great reputation as a bank and practices cross selling to its customers (from banking to mortgages to wealth management). With regulatory rules becoming more stringent and capital requirements not letting banks give out the dividends they originally want to shareholders, there is risk being in the financial services industry, however, with its conservative style and well capitalized balance sheet, WFC is a great buy.

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