Wells Fargo & CompanyWFCNYSE

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $60.31 per share(market-calibrated)

-27.6%

Upside to Fair Value

Current

$83.25

Pure Model

$57.87

Fair Value

$60.31

Bull Case

$59.39

Bear Case

$53.66

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

4.89%

Calibrated Growth

3.10%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $57.87.

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 $83.25, the market implies 4.89% perpetual growth — 239bps 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)57.82%

Debt Weight (D/V)42.18%

WACC Calculation

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

WACC = (57.82% × 9.28%) + (42.18% × 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$446.0B

PV of Terminal Value$169.9B

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$175.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$165.4B

PV of Terminal Value$169.9B

Enterprise Value$335.3B

(-) Net Debt$153.9B

Equity Value$181.4B

Shares Outstanding3.2B

Price per Share$57.08

Exit Multiple Method

PV of Projected FCFs$165.4B

PV of Terminal Value$175.0B

Enterprise Value$340.4B

(-) Net Debt$153.9B

Equity Value$186.5B

Shares Outstanding3.2B

Price per Share$58.67

Pure Model Fair Value

$57.87

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%	$78.37	$81.54	$85.29	$89.76	$95.20
9.13%	$65.23	$67.41	$69.93	$72.85	$76.30
10.13%	$54.55	$56.11	$57.87	$59.89	$62.20
11.13%	$45.63	$46.78	$48.06	$49.50	$51.13
12.13%	$38.04	$38.91	$39.86	$40.92	$42.11

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

$53.66

-35.5% vs current

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

Base Case

$57.87

-30.5% vs current

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

Bull Case

$59.39

-28.7% 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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