What is WFC's Intrinsic value?

Wells Fargo & Co (WFC) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Wells Fargo & Co's estimated intrinsic value ranges from $78.58 to $88.40 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $88.40 +21.4%
Dividend Discount Model (Stable) $78.58 +7.9%

Is Wells Fargo & Co (WFC) undervalued or overvalued?

With the current market price at $72.83, the stock appears to be moderately undervalued.

Understanding Intrinsic Value

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 & Co's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

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 0.86 1.1
Cost of equity 7.8% 11.1%
Cost of debt 5.0% 5.0%
Tax rate 14.5% 16.5%
Debt/Equity ratio 1.17 1.17
After-tax WACC 5.9% 7.3%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 31.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.4%
  • Long-term growth rate: 2.0%
  • Fair value: $88.40 (21.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.1% (Low) to 7.8% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $43 to $114
  • Selected fair value: $78.58 (7.9% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $237002M
Enterprise Value $550438M
Trailing P/E 11.85
Forward P/E 10.90
Trailing EV/EBITDA 0.00
Current Dividend Yield 266.88%
Dividend Growth Rate (5Y) 0.36%
Debt-to-Equity Ratio 1.17

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $17.68
Dividend Discount Model (Stable) 43% $11.79
Weighted Average 100% $84.19

Investment Conclusion

Based on our comprehensive valuation analysis, Wells Fargo & Co's weighted average intrinsic value is $84.19, which is approximately 15.6% above the current market price of $72.83.

Key investment considerations:

  • Historical dividend growth of 0.36%

Given these factors, we believe Wells Fargo & Co is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.