As of May 29, 2025, Wells Fargo Income Opportunities Fund's estimated intrinsic value ranges from $1.82 to $5.30 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $5.30 | -22.1% |
| Discounted Cash Flow (5Y) | $4.74 | -30.2% |
| Dividend Discount Model (Stable) | $2.40 | -64.8% |
| Earnings Power Value | $1.82 | -73.2% |
Is Wells Fargo Income Opportunities Fund (EAD) undervalued or overvalued?
With the current market price at $6.80, the stock appears to be significantly overvalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Wells Fargo Income Opportunities Fund's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.03 | 1.28 |
| Cost of equity | 8.6% | 12.0% |
| Cost of debt | 4.0% | 5.6% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 0.47 | 0.47 |
| After-tax WACC | 6.8% | 9.5% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $5 | $469M | 71.1% |
| 10-Year Growth | $5 | $502M | 50.2% |
| 5-Year EBITDA | $8 | $638M | 78.7% |
| 10-Year EBITDA | $8 | $632M | 60.5% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $23M |
| Discount Rate (WACC) | 9.5% - 6.8% |
| Enterprise Value | $247M - $346M |
| Net Debt | $189M |
| Equity Value | $58M - $157M |
| Outstanding Shares | 59M |
| Fair Value | $1 - $3 |
| Selected Fair Value | $1.82 |
| Metric | Value |
|---|---|
| Market Capitalization | $402M |
| Enterprise Value | $591M |
| Trailing P/E | 25.09 |
| Forward P/E | 25.09 |
| Trailing EV/EBITDA | 21.75 |
| Current Dividend Yield | 1008.89% |
| Dividend Growth Rate (5Y) | -2.99% |
| Debt-to-Equity Ratio | 0.47 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 37% | $1.59 |
| Discounted Cash Flow (5Y) | 31% | $1.19 |
| Dividend Discount Model (Stable) | 19% | $0.36 |
| Earnings Power Value | 12% | $0.18 |
| Weighted Average | 100% | $4.15 |
Based on our comprehensive valuation analysis, Wells Fargo Income Opportunities Fund's weighted average intrinsic value is $4.15, which is approximately 39.0% below the current market price of $6.80.
Key investment considerations:
Given these factors, we believe Wells Fargo Income Opportunities Fund is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.