Wells Fargo & Co Stock Buy Recommendation Reiterated (WFC)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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, expanding profit margins, notable return on equity and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 31.48% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WFC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • WELLS FARGO & CO has improved earnings per share by 22.7% 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 ($3.71 versus $3.36).
  • The gross profit margin for WELLS FARGO & CO is currently very high, coming in at 89.40%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 23.07% trails 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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.2%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

Wells Fargo & Company provides retail, commercial, and corporate banking services. Wells Fargo has a market cap of $215.4 billion and is part of the financial sector and banking industry. The company has a P/E ratio of 12.00, below the S&P 500 P/E ratio of 18.00. Shares are up 17.8% year to date as of the close of trading on Wednesday.

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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