Is WFC's long-term earnings growth trajectory still strong?

Wells Fargo's long-term earnings growth trajectory appears to be strong, despite some fluctuations in recent years. Here's the analysis to support this conclusion:

1. Recovery from Challenging Times: Wells Fargo's net income dropped significantly from $5.86 billion in Q1 2019 to $653 million in Q1 2020, primarily due to the economic impact of the COVID-19 pandemic. However, the company has since shown a recovery, with net income increasing to $23.8 billion by Q4 2021, and remaining relatively stable at $19.03 billion in Q4 2023.

WFC Net Income (FY) YoY, Net Income (FY)

2. Consistent Dividend Payments: Wells Fargo has a history of paying dividends, with an annualized dividend of $1.60 per share as of the latest data, representing a dividend yield of 2.4%. The company has increased its dividend 4 times over the past five years, with an average annual increase of 18.69%. This consistent dividend payment is a sign of stable earnings and a commitment to returning value to shareholders.
3. Share Repurchases and Capital Returns: Wells Fargo has been active in share repurchases, with a significant program completed in Q4 2024, purchasing 57.8 million shares for $4 billion. This action supports shareholder value creation and suggests confidence in the company's future earnings growth.
4. Market Performance and Analyst Confidence: Despite a recent decline in stock price, Wells Fargo's shares have outperformed the Dow Jones Industrials Average over the past year, with a 43.1% increase in the same period. Analysts have a positive outlook, with recent earnings beats and expectations of earnings growth for this fiscal year.
5. Intrinsic Value and Valuation: The Discounted Earnings (DCF) model suggests that Wells Fargo is significantly undervalued, with an intrinsic value of $168.13, compared to its current trading price of $71.11. This indicates potential for future price appreciation as the market recognizes the company's intrinsic value.

In conclusion, while Wells Fargo has faced challenges, its recovery, consistent dividend payments, share repurchases, and positive market performance and analyst sentiment suggest that the long-term earnings growth trajectory remains strong.