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Is Wells Fargo Stock A Good Buy BETTER

Wells Fargo (WFC -1.55%) has outperformed all of the major banks this year, with its stock price down only about 4% year to date. In comparison, its major competitors have all posted double-digit drops this year. Its valuation has also come way down with a forward price-to-earnings (P/E) ratio of 9, and a minuscule five-year P/E-to-growth (PEG) ratio of 0.19. Both are indicators of an undervalued stock.

is wells fargo stock a good buy


With its solid revenue gains in the most recent quarter and improving credit quality, it has been a nice safe haven for investors in this market. While it looks attractive and appears to be a solid buy, there is one major reason why I would look elsewhere if I were to add a bank stock to my portfolio right now.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

I downgrade my investment rating for Wells Fargo & Company's (NYSE:WFC) shares from a Buy to a Hold. In my article published almost a year ago on April 28, 2021, I compared WFC against Bank of America Corporation (NYSE:BAC) and determined that Wells Fargo was the more attractive stock of the two based on outlook and valuations.

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Wells Fargo (WFC) is one of the world's biggest banks. It's been dogged by regulatory issues, and the coronavirus crisis delivered another blow, sending Wells Fargo stock sharply lower.

But with the firm snapping a negative earnings streak, and showing progress toward eventually ending Fed limits on its size, is WFC stock a buy right now? Here is what fundamental and technical analysis says.

Wells Fargo stock was given a boost after it was reported that Federal Reserve officials "privately signaled" that they accept Wells Fargo's proposal to repair its risk management and governance practices.

Wells Fargo stock shed 44% of its value in 2020. This is despite the fact it went on a strong run from early November through to the end of the year. At one point it had plunged to its worst levels in 11 years after a downtrend hit the stock in early June. It sank even lower than its coronavirus crash lows.

The relative strength line for Wells Fargo stock has generally been spiking since November, though it has levelled off of late. It had previously sunk to levels not seen since 1990. The RS line still has a fair way to go before it reaches the where it started 2020. WFC stock has been underperforming the broader S&P 500 index, especially since the 2008 financial crisis.

MarketSmith analysis shows WFC stock sold off in above-average volume following its weak Q4 report, but then it bounced back. It was then snapped up in massive volume when it posted its strong Q1 earnings.

Big bank stocks generally have trouble outperforming the S&P 500 index over the long run, but Wells Fargo stock has been a notable laggard even among its peers. It is important it maintains its improving performance going forward.

WFC stock currently has a strong, but not ideal, IBD Composite Rating of 82. This puts it in the top 18% of all stocks tracked. It has taken major strides in improving in this key metric in recent months.

The Stock Checkup Tool shows Wells Fargo earnings are lagging its strong stock market performance. Its Relative Strength Rating is currently 87 out of 99. This means WFC is in the top 13% of stocks in terms of stock market performance over the past 12 months.

Big money is showing rising confidence in Wells Fargo stock. It holds an Accumulation/Distribution Rating of B-, which represents moderate buying. In total, 43% of its stock is now held by funds. CAN SLIM investors prefer to back stocks which are heavily backed by big money.

The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style.

Within each Score, stocks are graded into five groups: A, B, C, D and F. As you might remember from your school days, an A, is better than a B; a B is better than a C; a C is better than a D; and a D is better than an F.

As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style.