NEW YORK (
-- Wells Fargo
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
Highlights from the ratings report include:
- WELLS FARGO & CO has improved earnings per share by 27.3% 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. This trend suggests that the performance of the business is improving. During the past fiscal year, WELLS FARGO & CO increased its bottom line by earning $2.21 versus $1.77 in the prior year. This year, the market expects an improvement in earnings ($2.81 versus $2.21).
- The gross profit margin for WELLS FARGO & CO is currently very high, coming in at 84.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.90% is above that of the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 28.9% when compared to the same quarter one year prior, rising from $3,062.00 million to $3,948.00 million.
- WFC, with its decline in revenue, underperformed when compared the industry average of 20.7%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- In its most recent trading session, WFC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services primarily in the United States. The company operates in three segments: Community Banking; Wholesale Banking; and Wealth, Brokerage, and Retirement. The company has a P/E ratio of 9.2, equal to the average banking industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Wells Fargo has a market cap of $125.2 billion and is part of the
industry. Shares are down 24.6% year to date as of the close of trading on Monday.
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