Wells Fargo & Co. (WFC) will release its financial figures for the first quarter of fiscal 2018 before the market opens on Friday, April 13.
For the quarter, the average analyst is expecting the bank to post earnings per share of $1.07. This is a mean of 27 estimates. These estimates range between a low of $1.01 and a high of $1.17. Wells Fargo closed first quarter of fiscal 2017 reporting an EPS of $1.
Estimates on earnings are backed on a revenue predicted at $21.71 billion or a loss of 1.3% from the prior-year quarter. That is a mean of 20 estimtes ranging from $21.29 billion to $22.23 billion.
When screening for banks, I like to look at the following ratios: net margin. the net loans to total assets and the return on assets (ROA) ratios.
The net profit margin is 25.46% for Wells Fargo versus an industry median of 22.23%. The ratio is computed as net income on interest revenues over the trailing 12-month timeframe. The following GuruFocus charts illustrate the trend for net income, interest revenues and net margin over the last 10 full fiscals:
WFC data by GuruFocus.com
WFC data by GuruFocus.com
Wells Fargo’s loan-to-assets ratio is 49.5%. This means that the net profit of Wells Fargo is less dependent on asset management and trading activities than its peers:
| Item (in billions of USD), as of Q4 FY 2017 | Wells Fargo & Co. | JP Morgan Chase | Citigroup | Bank of America |
| Loan-to-assets ratio | 49.5% | 35.9% | 35.5% | 41.1% |
The following chart, which is powered by GuruFocus, shows the trend in the net loans and total assets over the last 10 fiscals:
WFC data by GuruFocus.com
Wells Fargo's return on assets (net income divided by total assets) is according to GuruFocus 1.14 versus an industry median of 0.87.
As of Dec. 31, 2017, the bank has $804.721 billion in cash on hand and securities, $1.5 trillion in long-term investments and $1.74 trillion in total liabilities.
Wells Fargo is trading around $53.23 per share and the market capitalization is $254.68 billion. The stock has a price-book ratio of 1.40 versus an industry median of 1.24 and a price-sales ratio of 3.01 versus an industry median of 3.56. The price-earnings ratio is 12.74 towards an industry median of 15.27 times.
The forward price-earnings ratio is 10.99 times versus an industry median of 13.87. When this ratio is multiplied by $4.88, which is an average quarterly weighted EPS for full fiscals 2018 and 2019, it yields a value of $53.63 per share.
The average target price is $63.05 per share, which is about 20.7% higher than the current market value per share.
According to GuruFocus, Wells Fargo’s share price is below both Peter Lynch Earnings Line (P/E = 15) and Price at Med P/E without NRI (P/E = 13.89) lines:
Wells Fargo is currently reporting 4.87 billion shares outstanding, of which a percentage of 99.95% is float. Insiders hold 0.07% of its stock. A portion of 79.79% is held by institutions.
As of Dec. 30, the bank's top shareholders include Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) with 9.40% of outstanding shares (-0.3% from the previous quarter) and Vanguard Group Inc. with 6.55% (+3.3% from the third quarter of 2017).
(Disclosure: I have no positions neither in Wells Fargo nor in any other stock I have mentioned in this article.)
