Intrinsic value of Wells Fargo - WFC

Previous Close

$58.07

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$58.07

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as WFC.

We calculate the intrinsic value of WFC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 288.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  87,578
  89,593
  91,895
  94,480
  97,344
  100,487
  103,909
  107,614
  111,605
  115,888
  120,470
  125,360
  130,565
  136,098
  141,969
  148,190
  154,776
  161,741
  169,099
  176,869
  185,067
  193,713
  202,827
  212,429
  222,542
  233,190
  244,397
  256,190
  268,598
  281,648
Variable operating expenses, $m
  54,298
  55,547
  56,975
  58,578
  60,354
  62,302
  64,424
  66,721
  69,195
  71,851
  74,692
  77,723
  80,951
  84,381
  88,021
  91,878
  95,961
  100,279
  104,842
  109,659
  114,742
  120,102
  125,752
  131,706
  137,976
  144,577
  151,526
  158,838
  166,531
  174,622
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  54,298
  55,547
  56,975
  58,578
  60,354
  62,302
  64,424
  66,721
  69,195
  71,851
  74,692
  77,723
  80,951
  84,381
  88,021
  91,878
  95,961
  100,279
  104,842
  109,659
  114,742
  120,102
  125,752
  131,706
  137,976
  144,577
  151,526
  158,838
  166,531
  174,622
Operating income, $m
  33,280
  34,045
  34,920
  35,902
  36,991
  38,185
  39,486
  40,893
  42,410
  44,037
  45,779
  47,637
  49,615
  51,717
  53,948
  56,312
  58,815
  61,461
  64,258
  67,210
  70,326
  73,611
  77,074
  80,723
  84,566
  88,612
  92,871
  97,352
  102,067
  107,026
EBITDA, $m
  231,259
  236,578
  242,658
  249,484
  257,048
  265,346
  274,383
  284,165
  294,704
  306,014
  318,114
  331,024
  344,771
  359,380
  374,883
  391,312
  408,702
  427,092
  446,524
  467,040
  488,689
  511,519
  535,584
  560,939
  587,644
  615,760
  645,355
  676,497
  709,259
  743,720
Interest expense (income), $m
  5,573
  80,486
  74,732
  76,261
  78,010
  79,973
  82,148
  84,535
  87,133
  89,946
  92,977
  96,230
  99,709
  103,422
  107,375
  111,577
  116,035
  120,759
  125,760
  131,049
  136,637
  142,537
  148,763
  155,328
  162,249
  169,540
  177,220
  185,305
  193,816
  202,772
  212,194
Earnings before tax, $m
  -47,207
  -40,687
  -41,341
  -42,107
  -42,982
  -43,963
  -45,049
  -46,240
  -47,537
  -48,940
  -50,451
  -52,073
  -53,807
  -55,658
  -57,628
  -59,722
  -61,944
  -64,299
  -66,791
  -69,427
  -72,211
  -75,152
  -78,254
  -81,526
  -84,974
  -88,608
  -92,435
  -96,464
  -100,705
  -105,167
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -47,207
  -40,687
  -41,341
  -42,107
  -42,982
  -43,963
  -45,049
  -46,240
  -47,537
  -48,940
  -50,451
  -52,073
  -53,807
  -55,658
  -57,628
  -59,722
  -61,944
  -64,299
  -66,791
  -69,427
  -72,211
  -75,152
  -78,254
  -81,526
  -84,974
  -88,608
  -92,435
  -96,464
  -100,705
  -105,167

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,368,410
  1,399,883
  1,435,860
  1,476,251
  1,521,006
  1,570,112
  1,623,585
  1,681,468
  1,743,827
  1,810,750
  1,882,347
  1,958,743
  2,040,084
  2,126,532
  2,218,264
  2,315,475
  2,418,377
  2,527,196
  2,642,177
  2,763,578
  2,891,677
  3,026,769
  3,169,165
  3,319,197
  3,477,214
  3,643,586
  3,818,703
  4,002,976
  4,196,840
  4,400,752
Adjusted assets (=assets-cash), $m
  1,368,410
  1,399,883
  1,435,860
  1,476,251
  1,521,006
  1,570,112
  1,623,585
  1,681,468
  1,743,827
  1,810,750
  1,882,347
  1,958,743
  2,040,084
  2,126,532
  2,218,264
  2,315,475
  2,418,377
  2,527,196
  2,642,177
  2,763,578
  2,891,677
  3,026,769
  3,169,165
  3,319,197
  3,477,214
  3,643,586
  3,818,703
  4,002,976
  4,196,840
  4,400,752
Revenue / Adjusted assets
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
  0.064
Average production assets, $m
  1,979,793
  2,025,328
  2,077,379
  2,135,816
  2,200,568
  2,271,614
  2,348,977
  2,432,721
  2,522,941
  2,619,765
  2,723,349
  2,833,878
  2,951,561
  3,076,632
  3,209,348
  3,349,992
  3,498,869
  3,656,307
  3,822,659
  3,998,300
  4,183,632
  4,379,081
  4,585,098
  4,802,161
  5,030,778
  5,271,482
  5,524,838
  5,791,442
  6,071,922
  6,366,938
Working capital, $m
  -1,751,389
  -1,791,671
  -1,837,717
  -1,889,412
  -1,946,693
  -2,009,543
  -2,077,982
  -2,152,064
  -2,231,875
  -2,317,529
  -2,409,163
  -2,506,941
  -2,611,047
  -2,721,688
  -2,839,094
  -2,963,512
  -3,095,213
  -3,234,488
  -3,381,648
  -3,537,026
  -3,700,977
  -3,873,877
  -4,056,126
  -4,248,148
  -4,450,389
  -4,663,324
  -4,887,451
  -5,123,298
  -5,371,419
  -5,632,400
Total debt, $m
  1,383,923
  1,412,249
  1,444,628
  1,480,980
  1,521,260
  1,565,455
  1,613,581
  1,665,675
  1,721,798
  1,782,029
  1,846,466
  1,915,223
  1,988,430
  2,066,232
  2,148,791
  2,236,282
  2,328,893
  2,426,831
  2,530,313
  2,639,574
  2,754,864
  2,876,446
  3,004,603
  3,139,632
  3,281,847
  3,431,582
  3,589,187
  3,755,033
  3,929,510
  4,113,031
Total liabilities, $m
  1,231,569
  1,259,895
  1,292,274
  1,328,626
  1,368,906
  1,413,101
  1,461,227
  1,513,321
  1,569,444
  1,629,675
  1,694,112
  1,762,869
  1,836,076
  1,913,878
  1,996,437
  2,083,928
  2,176,539
  2,274,477
  2,377,959
  2,487,220
  2,602,510
  2,724,092
  2,852,249
  2,987,278
  3,129,493
  3,279,228
  3,436,833
  3,602,679
  3,777,156
  3,960,677
Total equity, $m
  136,841
  139,988
  143,586
  147,625
  152,101
  157,011
  162,359
  168,147
  174,383
  181,075
  188,235
  195,874
  204,008
  212,653
  221,826
  231,548
  241,838
  252,720
  264,218
  276,358
  289,168
  302,677
  316,917
  331,920
  347,721
  364,359
  381,870
  400,298
  419,684
  440,075
Total liabilities and equity, $m
  1,368,410
  1,399,883
  1,435,860
  1,476,251
  1,521,007
  1,570,112
  1,623,586
  1,681,468
  1,743,827
  1,810,750
  1,882,347
  1,958,743
  2,040,084
  2,126,531
  2,218,263
  2,315,476
  2,418,377
  2,527,197
  2,642,177
  2,763,578
  2,891,678
  3,026,769
  3,169,166
  3,319,198
  3,477,214
  3,643,587
  3,818,703
  4,002,977
  4,196,840
  4,400,752
Debt-to-equity ratio
  10.110
  10.090
  10.060
  10.030
  10.000
  9.970
  9.940
  9.910
  9.870
  9.840
  9.810
  9.780
  9.750
  9.720
  9.690
  9.660
  9.630
  9.600
  9.580
  9.550
  9.530
  9.500
  9.480
  9.460
  9.440
  9.420
  9.400
  9.380
  9.360
  9.350
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -47,207
  -40,687
  -41,341
  -42,107
  -42,982
  -43,963
  -45,049
  -46,240
  -47,537
  -48,940
  -50,451
  -52,073
  -53,807
  -55,658
  -57,628
  -59,722
  -61,944
  -64,299
  -66,791
  -69,427
  -72,211
  -75,152
  -78,254
  -81,526
  -84,974
  -88,608
  -92,435
  -96,464
  -100,705
  -105,167
Depreciation, amort., depletion, $m
  197,979
  202,533
  207,738
  213,582
  220,057
  227,161
  234,898
  243,272
  252,294
  261,976
  272,335
  283,388
  295,156
  307,663
  320,935
  334,999
  349,887
  365,631
  382,266
  399,830
  418,363
  437,908
  458,510
  480,216
  503,078
  527,148
  552,484
  579,144
  607,192
  636,694
Funds from operations, $m
  150,773
  161,846
  166,397
  171,474
  177,075
  183,198
  189,849
  197,032
  204,758
  213,037
  221,884
  231,315
  241,349
  252,005
  263,306
  275,277
  287,943
  301,332
  315,475
  330,403
  346,152
  362,756
  380,256
  398,690
  418,104
  438,541
  460,049
  482,681
  506,488
  531,527
Change in working capital, $m
  -34,341
  -40,282
  -46,046
  -51,695
  -57,281
  -62,850
  -68,439
  -74,082
  -79,811
  -85,654
  -91,634
  -97,778
  -104,106
  -110,642
  -117,405
  -124,418
  -131,701
  -139,275
  -147,160
  -155,378
  -163,951
  -172,900
  -182,249
  -192,022
  -202,242
  -212,935
  -224,127
  -235,846
  -248,121
  -260,981
Cash from operations, $m
  185,114
  202,128
  212,443
  223,169
  234,356
  246,048
  258,287
  271,114
  284,569
  298,690
  313,518
  329,093
  345,455
  362,647
  380,712
  399,695
  419,644
  440,607
  462,635
  485,781
  510,103
  535,657
  562,505
  590,712
  620,345
  651,475
  684,176
  718,527
  754,609
  792,507
Maintenance CAPEX, $m
  -194,094
  -197,979
  -202,533
  -207,738
  -213,582
  -220,057
  -227,161
  -234,898
  -243,272
  -252,294
  -261,976
  -272,335
  -283,388
  -295,156
  -307,663
  -320,935
  -334,999
  -349,887
  -365,631
  -382,266
  -399,830
  -418,363
  -437,908
  -458,510
  -480,216
  -503,078
  -527,148
  -552,484
  -579,144
  -607,192
New CAPEX, $m
  -38,857
  -45,535
  -52,051
  -58,437
  -64,752
  -71,046
  -77,364
  -83,744
  -90,220
  -96,824
  -103,585
  -110,529
  -117,683
  -125,071
  -132,717
  -140,644
  -148,877
  -157,438
  -166,352
  -175,641
  -185,332
  -195,449
  -206,017
  -217,064
  -228,617
  -240,704
  -253,356
  -266,604
  -280,479
  -295,016
Cash from investing activities, $m
  -232,951
  -243,514
  -254,584
  -266,175
  -278,334
  -291,103
  -304,525
  -318,642
  -333,492
  -349,118
  -365,561
  -382,864
  -401,071
  -420,227
  -440,380
  -461,579
  -483,876
  -507,325
  -531,983
  -557,907
  -585,162
  -613,812
  -643,925
  -675,574
  -708,833
  -743,782
  -780,504
  -819,088
  -859,623
  -902,208
Free cash flow, $m
  -47,837
  -41,386
  -42,141
  -43,006
  -43,977
  -45,055
  -46,238
  -47,527
  -48,923
  -50,428
  -52,043
  -53,771
  -55,616
  -57,580
  -59,668
  -61,884
  -64,232
  -66,718
  -69,348
  -72,126
  -75,060
  -78,155
  -81,420
  -84,861
  -88,488
  -92,307
  -96,328
  -100,561
  -105,015
  -109,701
Issuance/(repayment) of debt, $m
  -106,566
  28,326
  32,379
  36,352
  40,280
  44,196
  48,126
  52,094
  56,123
  60,231
  64,437
  68,757
  73,207
  77,803
  82,559
  87,490
  92,612
  97,937
  103,482
  109,261
  115,289
  121,583
  128,157
  135,029
  142,215
  149,735
  157,605
  165,846
  174,478
  183,521
Issuance/(repurchase) of shares, $m
  186,192
  43,834
  44,939
  46,147
  47,458
  48,874
  50,396
  52,028
  53,772
  55,632
  57,611
  59,712
  61,941
  64,303
  66,802
  69,444
  72,234
  75,181
  78,289
  81,567
  85,021
  88,661
  92,494
  96,529
  100,776
  105,245
  109,946
  114,891
  120,091
  125,558
Cash from financing (excl. dividends), $m  
  79,626
  72,160
  77,318
  82,499
  87,738
  93,070
  98,522
  104,122
  109,895
  115,863
  122,048
  128,469
  135,148
  142,106
  149,361
  156,934
  164,846
  173,118
  181,771
  190,828
  200,310
  210,244
  220,651
  231,558
  242,991
  254,980
  267,551
  280,737
  294,569
  309,079
Total cash flow (excl. dividends), $m
  31,788
  30,774
  35,177
  39,493
  43,760
  48,014
  52,284
  56,596
  60,972
  65,436
  70,005
  74,698
  79,532
  84,525
  89,693
  95,050
  100,614
  106,400
  112,424
  118,702
  125,251
  132,088
  139,230
  146,696
  154,504
  162,673
  171,223
  180,176
  189,554
  199,378
Retained Cash Flow (-), $m
  -186,192
  -43,834
  -44,939
  -46,147
  -47,458
  -48,874
  -50,396
  -52,028
  -53,772
  -55,632
  -57,611
  -59,712
  -61,941
  -64,303
  -66,802
  -69,444
  -72,234
  -75,181
  -78,289
  -81,567
  -85,021
  -88,661
  -92,494
  -96,529
  -100,776
  -105,245
  -109,946
  -114,891
  -120,091
  -125,558
Prev. year cash balance distribution, $m
  2,144
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  2,061
  2,102
  2,150
  2,205
  2,268
  2,336
  2,412
  2,494
  2,583
  2,679
  2,781
  2,891
  3,009
  3,134
  3,266
  3,407
  3,557
  3,715
  3,882
  4,058
  4,245
  4,442
  4,649
  4,868
  5,098
  5,341
  5,597
  5,866
  6,149
  6,446
Cash available for distribution, $m
  -152,260
  -13,060
  -9,762
  -6,654
  -3,697
  -859
  1,888
  4,567
  7,200
  9,804
  12,394
  14,986
  17,591
  20,223
  22,891
  25,607
  28,380
  31,219
  34,135
  37,135
  40,230
  43,427
  46,737
  50,167
  53,728
  57,428
  61,277
  65,285
  69,463
  73,820
Discount rate, %
  15.50
  16.28
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.05
  25.25
  26.51
  27.84
  29.23
  30.69
  32.22
  33.83
  35.53
  37.30
  39.17
  41.13
  43.18
  45.34
  47.61
  49.99
  52.49
  55.11
  57.87
  60.76
  63.80
PV of cash for distribution, $m
  -131,826
  -9,660
  -6,081
  -3,439
  -1,560
  -291
  504
  942
  1,125
  1,137
  1,042
  892
  722
  558
  413
  293
  200
  131
  83
  50
  29
  16
  9
  4
  2
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  37.9
  28.7
  21.7
  16.4
  12.4
  9.4
  7.1
  5.4
  4.1
  3.1
  2.4
  1.8
  1.4
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0

Wells Fargo & Company is a bank holding company. The Company is a diversified financial services company. It has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company offers its services under three categories: personal, small business and commercial. It provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. It provides other financial services through its subsidiaries engaged in various businesses, including wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, computer and data processing services, investment advisory services, mortgage-backed securities servicing and venture capital investment.

FINANCIAL RATIOS  of  Wells Fargo (WFC)

Valuation Ratios
P/E Ratio 13.3
Price to Sales 0
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 1723.6
Price to Free Cash Flow 1723.6
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 176.3%
Total Debt to Equity 176.3%
Interest Coverage 7
Management Effectiveness
Return On Assets 1.4%
Ret/ On Assets - 3 Yr. Avg. 1.5%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 11.2%
Return On Equity - 3 Yr. Avg. 12.1%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 30.9%
Payout Ratio 41.2%

WFC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WFC stock intrinsic value calculation we used $85861 million for the last fiscal year's total revenue generated by Wells Fargo. The default revenue input number comes from 2017 income statement of Wells Fargo. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our WFC stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 15.5%, whose default value for WFC is calculated based on our internal credit rating of Wells Fargo, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Wells Fargo.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of WFC stock the variable cost ratio is equal to 62%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for WFC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Wells Fargo.

Corporate tax rate of 27% is the nominal tax rate for Wells Fargo. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the WFC stock is equal to 2.4%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for WFC are equal to 2260.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Wells Fargo operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for WFC is equal to -1999.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $0 million for Wells Fargo - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 4965 million for Wells Fargo is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Wells Fargo at the current share price and the inputted number of shares is $288.3 billion.

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COMPANY NEWS

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▶ [$$] Opinion today: Mud sticks to Wells Fargo   [01:00AM  Financial Times]
▶ [$$] Wells Fargo Risk Executive to Leave Bank   [08:43PM  The Wall Street Journal]
▶ Wells Fargo's Reputation Plunges   [04:11PM  Barrons.com]
▶ [$$] Wells Fargo Risk Executive to Leave Bank   [10:44AM  The Wall Street Journal]
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▶ Wells Fargo's national woes aren't slowing it down in Tampa Bay   [02:57PM  American City Business Journals]
▶ Wells Fargo admits to hundreds of mistaken foreclosures   [Aug-06-18 04:37PM  MarketWatch]
▶ Wells Fargo agrees to $8M payout for mortgage miscalculations   [02:28PM  American City Business Journals]
▶ Surprise: Wells Fargo Stock is Surging   [12:51PM  Barrons.com]
▶ Wells Fargo accidentally foreclosed on hundreds of homeowners   [11:01AM  American City Business Journals]
▶ [$$] Buy Ratings on Apple, Wells Fargo, Aflac   [Aug-03-18 08:00PM  Barrons.com]
▶ PRESS DIGEST- Financial Times - Aug 2   [Aug-01-18 07:59PM  Reuters]
▶ Wells Fargo Hit With $2.09 Billion Fine   [07:53PM  Meredith Videos]
▶ Business Highlights   [05:54PM  Associated Press]
▶ Wells Fargo Swallows a $2 Billion Fine   [05:01PM  Barrons.com]
▶ Beleaguered Wells Fargo hit with $2 billion fine over mortgages   [02:19PM  American City Business Journals]
▶ At Wells Fargo Wealth, Goals Triggered Trouble   [Jul-30-18 12:35PM  Barrons.com]
▶ [$$] Top Wells Fargo Wholesale Executive to Leave Bank   [Jul-29-18 07:43PM  The Wall Street Journal]
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