Since December 2020, the S&P 500 has delivered a total return of 86.5%. But one standout stock has more than doubled the market - over the past five years, Wells Fargo has surged 213% to $90.88 per share. Its momentum hasn’t stopped as it’s also gained 21.3% in the last six months thanks to its solid quarterly results, beating the S&P by 7.7%.
Is now the time to buy Wells Fargo, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Do We Think Wells Fargo Will Underperform?
We’re glad investors have benefited from the price increase, but we don't have much confidence in Wells Fargo. Here are three reasons there are better opportunities than WFC and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.
Wells Fargo’s net interest income has grown at a 2.4% annualized rate over the last five years, much worse than the broader banking industry and in line with its total revenue.
2. Net Interest Margin Dropping
Net interest margin (NIM) represents how much a bank earns in relation to its outstanding loans. It's one of the most important metrics to track because it shows how a bank's loans are performing and whether it has the ability to command higher premiums for its services.
Over the past two years, Wells Fargo’s net interest margin averaged 2.7%. Its margin also contracted by 45.3 basis points (100 basis points = 1 percentage point) over that period.
This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean that Wells Fargo either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.
3. Projected TBVPS Growth Is Slim
Tangible book value per share (TBVPS) growth is driven by a bank’s ability to earn more than its cost of capital through lending activities while maintaining a strong balance sheet.
Over the next 12 months, Consensus estimates call for Wells Fargo’s TBVPS to grow by 4.9% to $46.46, lousy growth rate.
Final Judgment
Wells Fargo doesn’t pass our quality test. With its shares outperforming the market lately, the stock trades at 1.7× forward P/B (or $90.88 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d recommend looking at one of our top digital advertising picks.
Stocks We Would Buy Instead of Wells Fargo
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
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