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Wells Fargo Intrinsic Value: DCF (Earnings Based)

: $52.06 (As of Today)
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As of today (2022-10-03), Wells Fargo's intrinsic value calculated from the Discounted Earnings model is $52.06.

Note: Discounted Earnings model is only suitable for predictable companies (Business Predictability Rank higher than 1-Star). If the company's predictability rank is 1-Star or Not Rated, result may not be accurate due to the low predictability of business and the data will not be stored into our database.

Wells Fargo's Predictability Rank is 4.5-Stars.

Margin of Safety (Earnings Based) using Discounted Earnings model for Wells Fargo is 22.74%.

The historical rank and industry rank for Wells Fargo's Intrinsic Value: DCF (Earnings Based) or its related term are showing as below:

WFC' s Price-to-DCF (Earnings Based) Range Over the Past 10 Years
Min: 0.33   Med: 0.75   Max: 5.5
Current: 0.77

During the past 13 years, the highest Price-to-Intrinsic-Value-DCF (Earnings Based) Ratio of Wells Fargo was 5.50. The lowest was 0.33. And the median was 0.75.

WFC's Price-to-DCF (Earnings Based) is ranked worse than
73.9% of 521 companies
in the Banks industry
Industry Median: 0.54 vs WFC: 0.77

Wells Fargo Intrinsic Value: DCF (Earnings Based) Historical Data

The historical data trend for Wells Fargo's Intrinsic Value: DCF (Earnings Based) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Wells Fargo Annual Data
Trend Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20 Dec21
Intrinsic Value: DCF (Earnings Based)
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 98.77 113.58 - 5.49 73.06

Wells Fargo Quarterly Data
Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22
Intrinsic Value: DCF (Earnings Based) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 55.20 62.14 73.06 65.18 56.51

Wells Fargo Intrinsic Value: DCF (Earnings Based) Calculation

This is the intrinsic value calculated from the Discounted Earnings model with default parameters. The calculation method is the same as Discounted Cash Flow model except earnings are used in the calculation instead of free cash flow. This is the default method of calculation with GuruFocus DCF calculator.

Usually a two-stage model is used in calculating the intrinsic value with discounted cash flow model. The first stage is called growth stage; the second is called the terminal stage. In the growth stage the company grows at a faster rate. Because it cannot grow at that rate forever, a lower rate is used for the terminal stage.

GuruFocus DCF calculator is a two-stage model. The default values are defined as:

1. Discount Rate: d = 10%
A reasonable discount rate assumption should be at least the long term average return of the stock market, which can be estimated from risk free rate plus risk premium of stock market. We used the 10-Year Treasury Constant Maturity Rate as the risk free rate and rounded up to the nearest integer, then added a risk premium of 6% to get the estimated discount rate. Some investors use their expected rate of return, which is also reasonable. A typical discount rate can be anywhere between 6% - 20%.

2. Growth Rate in the growth stage: g1 = 5%
Growth Rate in the growth stage = average earnings growth rate in the past 10 years. If it is higher than 20%, we use 20%. If it is less than 5%, we use 5% instead. => For companies with Average Earnings Growth Rate in the past 10 years less than 5%, GuruFocus defaults => Growth Rate: 5%

3. Years of Growth Stage: y1 = 10

4. Terminal Growth Rate: g2 = 4%

5. Years of Terminal Growth: y2 = 10

6. EPS without NRI: eps without nri = $4.170.
GuruFocus DCF calculator is actually a Discounted Earnings calculator, the Earnings Per Share without NRI is used as the default. The reason we are doing this is we found that historically stock prices are more correlated with earnings than free cash flow.

All of the default settings can be changed and the results are calculated automatically.

Wells Fargo's Intrinsic Value: DCF (Earnings Based) for today is calculated as:

Intrinsic Value: DCF (Earnings Based)=Earnings per Share (Diluted)*{[(1+g1)/(1+d)+(1+g1)^2/(1+d)^2+...+(1+g1)^10/(1+d)^10]
+(1+g1)^10/(1+d)^10*[(1+g2)/(1+d)+(1+g2)^2/(1+d)^2+...+(1+g2)^10/(1+d)^10]}

set x = (1+g1)/(1+d) = (1+0.05)/(1+0.1) = 0.95454545454545
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.1) = 0.94545454545455

Intrinsic Value: DCF (Earnings Based)=Earnings per Share (Diluted)*{[x+x^2+...+x^10]+x^10*[y+y^2+...+y^10]}
=Earnings per Share (Diluted)*[x*(1-x^10)/(1-x)+x^10*y*(1-y^10)/(1-y)]
=4.170*12.485
=52.06

Margin of Safety % (DCF Earnings Based)=(Intrinsic Value: DCF (Earnings Based)-Current Price)/Intrinsic Value: DCF (Earnings Based)
=(52.06-40.22)/52.06
=22.74 %

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


Wells Fargo  (NYSE:WFC) Intrinsic Value: DCF (Earnings Based) Explanation

Unlike valuation methods such as Net Current Asset Value, Tangible Book Value per Share, Graham Number, Median Ratio etc, discounted Cash Flow model evaluates the companies based on their future earnings power instead of their assets.


Be Aware

What you need to know about Discounted Earnings model:

1. The Discounted Earnings model evaluates a company based on its future earnings power
2. Growth is taken into account; therefore a faster growth company is worth more if everything else is the same.
3. Since we are projecting future growth, it is assumed that the company will grow at the same rate as it did during the past 10 years. Therefore this model works better for the companies that are relatively consistent performers.
4. The Discounted Earnings model works poorly for inconsistent performers like cyclicals.
5. Your expected return from the investment is a reasonable discount rate assumption.
6. A larger margin of safety should be required for companies with less predictable businesses.

You can screen for stocks that trade below their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) with the GuruFocus All-in-One Screener. Companies with a high Predictability Rank that trade at a discount to their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) can be found in the screen of Undervalued Predictable Companies.


Wells Fargo Intrinsic Value: DCF (Earnings Based) Related Terms

Thank you for viewing the detailed overview of Wells Fargo's Intrinsic Value: DCF (Earnings Based) provided by GuruFocus.com. Please click on the following links to see related term pages.


Wells Fargo Business Description

Wells Fargo logo
Industry
GURUFOCUS.COM » STOCK LIST » Financial Services » Banks » Wells Fargo & Co (NYSE:WFC) » Definitions » Intrinsic Value: DCF (Earnings Based)
Address
420 Montgomery Street, San Francisco, CA, USA, 94104
Wells Fargo is one of the largest banks in the United States, with approximately $1.9 trillion in balance sheet assets. The company is split into four primary segments: consumer banking, commercial banking, corporate and investment banking, and wealth and investment management. It is almost entirely focused on the U.S.
Executives
Davis Richard K director 800 NICOLLET MALL MINNEAPOLIS MN 55402
Norwood Felicia F director 120 MONUMENT CIRCLE INDIANAPOLIS IN 46204
Morken Cecelia director 26025 MUREAU ROAD CALABASAS CA 91302
Ling Bei officer: Sr. Executive Vice President 30 HUDSON YARDS NEW YORK NY 10001
Hranicky Kyle G officer: Sr. Executive Vice President 1000 LOUISIANA STREET HOUSTON TX 77002
Santos Kleber officer: Sr. Executive Vice President 1680 CAPITAL ONE DRIVE MCLEAN VA 22102
Williams Ather Iii officer: Sr. Executive Vice President 30 HUDSON YARDS NEW YORK NY 10001
Santomassimo Michael P. officer: Sr. EVP & CFO 225 LIBERTY STREET NEW YORK NY 10286
Chancy Mark A director 303 PEACHTREE ST. 30TH FLOOR ATLANTA GA 30308
Owens Lester officer: Sr. Executive Vice President 240 GREENWICH STREET NEW YORK NY 10286
Sommers Barry officer: Sr. Executive Vice President 30 HUDSON YARDS NEW YORK NY 10001
Weinbach Michael S officer: Sr. Executive Vice President 30 HUDSON YARDS NEW YORK NY 10001
Black Steven D director C/O JPMORGAN CHASE & CO. 270 PARK AVENUE NEW YORK NY 10017
Carr Muneera S officer: EVP, CAO & Controller 1717 MAIN STREET MAIL CODE 6500 DALLAS TX 75201
Patterson Ellen R officer: Sr. EVP and General Counsel 30 HUDSON YARDS NEW YORK NY 10001

Wells Fargo Headlines

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