Wells Fargo Stock Analysis – Is WFC still a good investment after the scandal?

It’s been a long time since I last posted a stock analysis. I was busy with other stuff that I lost a little discipline here. Anyways, I make this analysis on a company that recently made headlines…certainly not a good headline and this was one of Warren Buffett’s stock holding.

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As always, my goals with this Wells Fargo Stock Analysis is to keep things simple and straightforward with no bias. Remember to leave a comment at the end of this analysis if you find it helpful…


Wells Fargo Stock Analysis – Business Snapshot

Wells Fargo Stock Analysis - Business Snapshot

Wells Fargo Stock Analysis – Business Snapshot

Wells Fargo, at one point in time, was the largest bank in the world in terms of market capitalization. It was famous for it’s ability to cross sell to existing customer and the Senior Management of Wells Fargo proudly claim that the bank has very deep relationship with its customers. While the average bank customers has 3 account, customers in Wells Fargo has an average of 7 banking accounts with them. This was the strength of Well Fargo and having the ability to sell wide and deep made it extremely profitable. This cross selling ability made Wells Fargo Relationship team legendary in the banking industry. However, everything came a nasty turn when it turns out that the so called deep relationship Wells Fargo has is all but a scam. Quota driven employees opened accounts on behalf of customers without their authorization.

Now, I believe that there’s still something left in Wells Fargo. It will not bankrupt because of this. Our job is to find out the intrinsic value of Wells and see if we can get in for cheap. Here’s the Wells Fargo Scandal explained…


Wells Fargo Stock Analysis – Earnings Per Share

Wells Fargo Stock Analysis - Earnings Per Share

Wells Fargo Stock Analysis – Earnings Per Share

With the scandal now out, many of these numbers can be discounted. But we will still look at it for reference. Although somewhat manipulated (as we all know now), the numbers are looking decent.


Wells Fargo Stock Analysis – Return on Equity

Wells Fargo Stock Analysis - Return on Equity

Wells Fargo Stock Analysis – Return on Equity

Really quite ok ROE ratio. Not great but it’s decent.


Wells Fargo Stock Analysis – Operating Cash Flow

Wells Fargo Stock Analysis - Operating Cash Flow

Wells Fargo Stock Analysis – Operating Cash Flow

There’s no consistency in the Operating Cash Flow. But the good thing is that it’s positive for the past 10 years except for on year in 2008. We prefer to see stocks with steady growth instead of spikes.


Wells Fargo Stock Analysis – Still a Good Buy?

Banking is still important and will continue to play an important role in our economy. Wells Fargo certainly has a place in the marketplace but it’s losing it’s reputation fast through this scandal. I like it when a good company is beaten down on scandals. This one might rock the EPS and bottomline but it’s still worth a look. So here’s my calculation on Wells Fargo entry price that might just get me involved in this company.

Wells Fargo Stock Analysis - Target Entry and Exit Price

Wells Fargo Stock Analysis – Target Entry and Exit Price

At the time of this writing, WFC is at $44. Although it’s almost at its 52 week low because of this scandal, we feel the fair price for Wells is only at $34. So… there’s nothing to do now but wait…

Decide well and Good luck! Also, please leave a comment below as I love to hear from you.

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