Shares of Wells Fargo (WFC) have been rising in a slow and steady manner since the beginning of 2013, and with interest rates set to possibly rise in September, the bank — and nation’s largest mortgage lender — may have better profitability on the horizon.
Ten Year Chart
Like all bank stocks, WFC took the financial crisis hard, as profits dipped from $2.38 in 2006 to $0.70 in 2008. Since then, profits have been up each year. But the negative is now profit growth is slow, very slow. Profits growth clocked in at +3%, +2%, -1% and +2% the last four quarters respectively. Sales growth was only 1% last qtr.
Analysts estimate WFC’s long-term profit growth rate at 10% per year. Tack on a 3% dividend and you could have a 13% annual return each year (in a perfect world, which this is not). At 14x earnings the stock’s not expensive.
Profit History
As the Profit History table shows, WFC was a bargain during 2011-2013. Now the stock is fairly valued. I feel this $58 stock is worth $63 next year. plus you get the dividends. A modest return for a relatively safe company. Value Line rates WFC a 2 for safety.
Sharek’s Take
Wells Fargo is a timely conservative stock — with timely being the key here. Many conservative stocks aren’t trending higher right now as the strong dollar is crimping profits with many multi-nationals. This is a sound, safe investment for conservative accounts, that should be able to keep providing slow and steady returns to its investors.
View the One Year Chart here. View the Earnings Table here.
