Wells Fargo Offers Investors An Annualized Gross Return Of Between 12% And 19% Over The Next 5 Years

| About: Wells Fargo (WFC)

Background and Thesis

The purpose of this article is to calculate the returns one can reasonably expect by buying Wells Fargo (NYSE:WFC). We believe the stock offers excellent growth prospects in relation to price at 11.06x trailing 12-month earnings.

Company Overview

Margins have almost recovered to pre-crisis levels ...

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Revenues/Equity still depressed but when they start to improve, ROE will shoot up ...

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Equity base increased 7x in the last ten years, stock price never followed ...

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ROE still well below average levels and significantly below pre-crisis levels ...

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Relative P/E trading below historical averages. Potential for multiple expansion ...

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Relative P/E will recover when ROE recovers ...

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Our EPS estimates ...

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Our price forecasts suggest $60 to $85 in 5 years ...

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Conclusion

IRR of between 12.2% and 19.8% over the next 5 years.We appreciate that this is quite a wide range, but it depends on the extent of multiple expansion ...

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Disclosure: I am long WFC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.