| 2018 | 2019 | 2020 | 2021 (projected) | Cash and Equivalents | 173.29 B | 141.25 B | 127.12 B | 138.03 B | Total Assets | 1,895.88 B | 1,927.56 B | 1,734.8 B | 1,616.3 B |
Is Wells Fargo (NYSE:WFC) a good hedge for your existing portfolios?
 | By Rifka Kats | Macroaxis Story |
Considering the 60-days investment horizon Wells Fargo is expected to generate 2.62 times more return on investment than the market. However, the company is 2.62 times more volatile than its market benchmark. It trades about 0.27 of its potential returns per unit of risk. The DOW is currently generating roughly 0.14 per unit of risk. As many old-fashioned traders are trying to avoid financial services space, it makes sense to go over Wells Fargo a little further and try to understand its current volatility patterns. We are going to analyze if the current expected returns justify Wells Fargo's volatility.
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Reviewed by Gabriel Shpitalnik
The company has 289.72 B in debt with debt to equity (D/E) ratio of 8.26, demonstrating that Wells Fargo may be unable to create cash to meet all of its financial commitments. Volatility is a rate at which the price of Wells Fargo or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Wells Fargo may increase or decrease. In other words, similar to Wells's beta indicator, it measures the risk of Wells Fargo and helps estimate the fluctuations that may happen in a short period of time. So if prices of Wells Fargo fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.
How important is Wells Fargo's Liquidity
Wells Fargo financial leverage refers to using borrowed capital as a funding source to finance Wells Fargo ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Wells Fargo financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Wells Fargo's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Wells Fargo's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Wells Fargo's total debt and its cash.
Wells Fargo Gross Profit
Wells Fargo Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Wells Fargo previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Wells Fargo Gross Profit growth over the last 10 years. Please check Wells Fargo's gross profit and other fundamental indicators for more details.
Wells Fargo Volatility Drivers
Wells Fargo unsystematic risk is unique to Wells Fargo and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Wells Fargo you can also buy Bank of America. You can also mitigate this risk by investing in the financials sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Wells Fargo important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Wells Fargo income statement and balance sheet. Here are more details about Wells volatility.Click cells to compare fundamentals
What is driving Wells Fargo Investor Appetite?
The current price rise of Wells Fargo may raise some interest from investors as it is trading at a share price of 34.75 on 51,233,854 in trading volume. The company executives may have good odds in positioning the company resources to exploit market volatility in February. The stock standard deviation of daily returns for 30 days investing horizon is currently 2.69. The current volatility is consistent with the ongoing market swings in December 2020 as well as with Wells Fargo unsystematic, company-specific events.
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