Wells Fargo & CompanyWFCNYSE

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $60.22 per share(market-calibrated)

-27.0%

Upside to Fair Value

Current

$82.54

Pure Model

$57.83

Fair Value

$60.22

Bull Case

$59.32

Bear Case

$53.64

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

4.85%

Calibrated Growth

3.09%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $57.83.

What's Driving This Ratingfor WFC

✓

CapEx already efficient

CapEx at 0.00% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 22.42% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $31.4B (26.83% margin).

→

Moderate revenue growth

Analyst consensus projects -28.44% revenue growth, fading to 2.50% by Year 10. Revenue reaches $117.0B (vs $123.5B today).

🎯

Market pricing in higher long-term growth

To justify $82.54, the market implies 4.85% perpetual growth — 235bps above the model's 2.50%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 86.75% indicates efficient cash generation. FCF reaches $33.2B by Year 10 (28.37% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.06

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)9.28%

Cost of Debt

Pre-tax Cost of Debt13.33%

Tax Rate15.24%

After-tax Cost of Debt11.30%

Equity Weight (E/V)57.62%

Debt Weight (D/V)42.38%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (57.62% × 9.28%) + (42.38% × 11.30%)

= 10.13%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$88.4B	$97.2B	$103.4B	$108.7B	$117.0B
EBIT	$19.8B	$21.8B	$25.3B	$27.9B	$31.4B
Tax	$3.0B	$3.3B	$3.9B	$4.3B	$4.8B
NOPAT	$16.8B	$18.5B	$21.4B	$23.7B	$26.6B
+ Depreciation	$5.2B	$5.7B	$6.1B	$6.4B	$6.9B
- Capex	--	--	--	--	--
- Δ NWC	-$3.5B	$479M	$252M	$265M	$285M
Free Cash Flow	$25.5B	$23.7B	$27.2B	$29.8B	$33.2B
Discount Factor	0.908	0.749	0.617	0.509	0.381
Present Value	$23.2B	$17.7B	$16.8B	$15.2B	$12.6B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$33.2B

Terminal Growth Rate2.50%

WACC10.13%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$445.7B

PV of Terminal Value$169.7B

Exit Multiple Method

Year 10 EBITDA$38.3B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$459.3B

PV of Terminal Value$174.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$165.4B

PV of Terminal Value$169.7B

Enterprise Value$335.1B

(-) Net Debt$153.9B

Equity Value$181.3B

Shares Outstanding3.2B

Price per Share$57.02

Exit Multiple Method

PV of Projected FCFs$165.4B

PV of Terminal Value$174.9B

Enterprise Value$340.3B

(-) Net Debt$153.9B

Equity Value$186.4B

Shares Outstanding3.2B

Price per Share$58.64

Pure Model Fair Value

$57.83

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
8.13%	$78.30	$81.48	$85.21	$89.68	$95.10
9.13%	$65.18	$67.36	$69.87	$72.79	$76.23
10.13%	$54.51	$56.06	$57.83	$59.84	$62.15
11.13%	$45.60	$46.74	$48.02	$49.46	$51.09
12.13%	$38.01	$38.88	$39.83	$40.89	$42.07

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$53.64

-35.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.33

Base Case

$57.83

-29.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.06

Bull Case

$59.32

-28.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.90

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-28.44%

Year 3 Revenue Growth5.18%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin22.42%

Terminal EBIT Margin28.00%

Tax Rate15.24%

Historical Capex / Rev0.00%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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