NEW YORK (TheStreet) -- Shares of Wells Fargo (WFC) - Get Wells Fargo & Company Report , despite losing 2.7% last week, are up 11.5% on the year to date, according to Morningstar. The bank reports third-quarter earnings Tuesday, and there's no reason to sell now.
All told, Wells Fargo is one of the best banks in the sector, and maybe one of the best companies in any industry. These shares are attractively priced relative to performance and expected growth. Investors looking for a solid name should consider Wells Fargo, especially as lending conditions continue to improve.
The stock closed Friday at $50.64, down 0.94% amid broad market concerns about the direction of interest rates. The big question is to what degree raising rates will impact the entire financial sector.
Still, despite last week's punishment, Wells stock continues to outperform both the S&P 500 (SPY) - Get SPDR S&P 500 ETF Trust Report and the Dow Jones Industrial Average (DJI) , which are up 3.1% and down 0.2%, respectively, in 2014.
In fact, Wells Fargo's year-to-date performance is also tops among the major four banks, including JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. (JPM) Report and Bank of America (BAC) - Get Bank of America Corp Report , which have posted 2014 gains of 0.7% and 5.8%, respectively. Citigroup (C) - Get Citigroup Inc. Report , meanwhile, lags behind with declines of 3.8%.
Wells Fargo's corporate slogan, "Together we'll go far," might as well have been a promise to its shareholders in 2014. They've gotten rich. And with a quarter of the year still left, investors can still bank on Wells Fargo's performance. These shares are not done climbing.
Patient investors can still make 18% to 28% returns in the next 12 to 18 months, which would put the stock right around $60 to $65. And that's still conservative. Even Wells Fargo's median analyst target of $55, according to CNN Money, suggests a premium of almost 10%. The stock has a high analyst target of $63.
Despite Wells' outperformance in 2014, these shares, which trade at a trailing price-to-earnings ratio of 12.5, are still the cheapest among the major four banks. JPMorgan and Citigroup trade on multiples of 15 and 17, respectively.
Bank of America, meanwhile, tops the list at a P/E of 26, or more than twice the P/E of Wells Fargo. This is even though Wells Fargo is the only one among the four banks that's producing revenue, growing 1% year over year in the most recent quarter.
What's more, Wells Fargo is also tops among the major four banks with a 44% operating margin, which also exceeds the industry average of 36%, according to Yahoo! Finance.
Last but not least, on a price-to-earnings-growth ratio, Wells Fargo's stock is also the cheapest among the four banks, trading at a PEG of 1.27. Bank of America leads the group with a PEG of 5.42, while JPMorgan stands at 2.35.
This low PEG implies the least amount of risk in Wells Fargo's relative value. It's based on the price investors are willing to pay today for growth, and earnings the bank is likely to generate in the future.
To that end, based on its forward earnings estimates of $4.27, according to Yahoo! Finance, Wells Fargo's forward P/E of 11 is still four points lower than the industry average and two points lower than the P/E of companies in the S&P 500.
Already the largest bank by market cap, Wells Fargo is also the safest according to these numbers. And in a more favorable interest rate environment, Wells Fargo, which is the No. 1 mortgage originator in the U.S., should find it easier to generate higher profits as it continues to diversify its business. That should help boost the yield, which currently stands at 2.8%.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates WELLS FARGO & CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate WELLS FARGO & CO (WFC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
You can view the full analysis from the report here: WFC Ratings Report