Wells Fargo

Methodology

This EPS-based method has significant limitations for Wells Fargo as a bank, since traditional valuation approaches focus on price-to-tangible-book-value relative to return on equity rather than P/E multiples. Credit quality, regulatory constraints from past issues, and interest rate sensitivity drive valuation more than simple earnings growth. Investors should prioritize price-to-tangible-book versus ROE analysis and monitor the company's progress in resolving regulatory matters that cap asset growth.

Methodology

PEG ratios are problematic for Wells Fargo because bank earnings are highly sensitive to interest rate cycles, credit losses, and regulatory headwinds that create volatile growth patterns. Additionally, the asset cap and consent orders create unique constraints that make Wells Fargo's earnings trajectory different from peers. Price-to-tangible-book value compared to through-cycle ROE potential provides more reliable valuation signals than PEG for a bank still working through regulatory remediation.

Methodology

Wells Fargo pays a substantial dividend, though the payout has been constrained by regulatory capital requirements and the asset cap, making PEGY more relevant than PEG alone. However, the fundamental limitations of using PEG for banks remain—earnings volatility from credit cycles and regulatory impacts makes growth analysis unreliable. For income-focused bank investors, PEGY captures both the attractive yield and the bank's eventual earnings normalization potential as regulatory constraints are lifted.