Wells Fargo's 5-Year Total Return and Strategic Outlook: A Compelling Long-Term Buy?

Wells Fargo & Co. (WFC) has emerged as a standout performer in the banking sector over the past five years, delivering a total return of approximately 269% to 303% from 2020 to 2025, depending on the calculation methodology according to financial charts. This robust performance, driven by reinvested dividends and a rebound in stock price, has positioned the bank for renewed scrutiny as it navigates a pivotal strategic inflection point. With the Federal Reserve's asset cap lifted in June 2025 and earnings growth accelerating, investors are now weighing whether Wells Fargo represents a compelling long-term buy.

5-Year Total Return: A Tale of Resilience and Reinvestment

From 2020 to 2025, Wells Fargo's stock price and reinvested dividends generated a total return ranging from 241.93% to 303.2% according to financial charts. This outperformance is particularly striking given the bank's 2020 struggles, when its stock plummeted by 41.65% amid pandemic-driven economic uncertainty. The recovery has been fueled by disciplined cost-cutting, a focus on high-margin businesses, and aggressive dividend reinvestment. For instance, the bank's 2.09% dividend yield in 2025-supported by an annual payout of $1.80 per share-has compounded returns for shareholders.

However, the total return figures mask uneven annual performance. While 2024 saw a 46.48% surge in stock price, the 5-year average earnings per share (EPS) growth of 5.7% annually appears modest compared to the stock's price gains according to earnings data. This discrepancy raises questions about whether the market is pricing in future earnings potential rather than current fundamentals.

Strategic Outlook: Post-Asset Cap Expansion and Profitability Targets

The removal of the asset cap in June 2025 has unlocked a critical growth lever for Wells Fargo. CEO Charlie Scharf has outlined an ambitious strategy to become the "No. 1 U.S. consumer and business bank," leveraging the bank's expanded capacity to grow deposits and lending. This shift is already translating into tangible results: Q3 2025 earnings exceeded expectations, with net income rising 9% year-over-year to $5.6 billion and revenue growing 5% to $21.4 billion according to Q3 2025 earnings.

The bank's profitability targets have also been raised, with a new return on tangible common equity (ROTCE) goal of 17% to 18%, up from 15% previously according to financial reports. This reflects confidence in the bank's ability to capitalize on its expanded scale and operational efficiency gains. Notably, the stock price has gained 12.4% in 2025 alone according to CNBC, suggesting investor optimism about the post-cap strategy.

Earnings Growth vs. Valuation: Is the Stock Undervalued?

While Wells Fargo's 5-year EPS growth averaged 5.7% annually, the trailing twelve months (TTM) EPS reached $6.14 in 2025, up from $0.43 in 2020 according to macro trends. This represents a compound annual growth rate (CAGR) of 17% over the past three years according to financial data, outpacing the broader banking sector. Yet the stock's price-to-earnings (P/E) ratio of 13.93 as of November 26, 2025, remains 11% below its 10-year historical average of 15.65 according to financial analysis. This suggests the market may be discounting future earnings growth, particularly given the bank's recent profitability improvements and strategic clarity.

The disconnect between earnings and valuation could present an opportunity. With a forward P/E of 13.93 and a dividend yield of 2.09%, Wells Fargo offers a compelling risk-rebalance for long-term investors seeking income and growth. Moreover, the bank's Q3 2025 results-marked by a 9.3% year-over-year increase in adjusted EPS to $1.73-underscore its ability to exceed expectations according to Nasdaq reporting.

Conclusion: A Strategic Buy for Patient Investors

Wells Fargo's 5-year total return demonstrates its resilience and the power of reinvested dividends. However, the stock's current valuation and strategic momentum suggest that the best may still be ahead. The removal of the asset cap, combined with a revised ROTCE target and strong earnings execution, positions the bank to outperform in a low-interest-rate environment. For investors with a long-term horizon, Wells Fargo's undervalued P/E ratio, coupled with its focus on high-margin consumer and business banking, makes it a compelling buy.