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What To Buy: Wells Fargo & Co's Buy Recommendation Reiterated

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK (TheStreet) -- Wells Fargo (NYSE:WFC) has been reiterated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • WELLS FARGO & CO has improved earnings per share by 19.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WELLS FARGO & CO increased its bottom line by earning $3.36 versus $2.82 in the prior year. This year, the market expects an improvement in earnings ($3.85 versus $3.36).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Commercial Banks industry average. The net income increased by 19.4% when compared to the same quarter one year prior, going from $4,622.00 million to $5,519.00 million.
  • The gross profit margin for WELLS FARGO & CO is currently very high, coming in at 92.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 24.57% significantly outperformed against the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, WELLS FARGO & CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

Wells Fargo & Company provides retail, commercial, and corporate banking services. Wells Fargo has a market cap of $224.0 billion and is part of the financial sector and banking industry. Shares are up 23.4% year to date as of the close of trading on Monday.

You can view the full Wells Fargo Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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