End Of Q3 Is Time To Buy Wells Fargo
Wells Fargo (WFC) is one of the most attractive options in the financial industry. Current shareholders should hold long-term, and interested investors may look toward the third quarter’s end as an opportune time to buy. The combination of additional quantitative easing and management’s projection for a 17 basis point reduction in net interest margin may bring Wells Fargo’s stock down slightly. At its current rate, Wells Fargo has favorable metrics, an adequate dividend and a history of better risk management compared to most major banks. Wells Fargo is benefiting from its market share in the mortgage industry while it improves its underwriting and investment banking portfolio as well.
JPMorgan (JPM), Bank of America (BAC), US Bancorp (USB) and Citigroup (C) are the major banks most comparable to Wells Fargo. US Bancorp and Wells Fargo have been the least risk laden due to their strategic risk management and lack of exposure to Europe’s crisis. Wells Fargo’s $3.03 EPS is lower than JPMorgan’s $4.32 EPS and Citigroup’s $3.45. Wells Fargo’s price is 11.5 times earnings, USB is 12.5 times earnings – these are the highest; JPMorgan, Citigroup, and Bank of America are all under 10 times earnings.
Wells Fargo’s 1.22 debt-to-equity ratio is the lowest among the banks. Its annualized dividend is around $0.88, JPMorgan’s $1.20 annual rate is the highest. Wells Fargo’s 12.3% ROE, 31% operating margin and 20.8% profit margin are all second-highest, trailing only US Bancorp by around 400 bps. Wells Fargo’s 8.9% sales growth is by far the highest among these banks. Its stock is up 29%, YTD through late September. Wells Fargo shares are up 6.5% since its last earnings release. To continue reading, click here.