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Here's Why Hold Strategy is Apt for WEX Stock Right Now

·3 min read

WEX Inc. WEX is currently benefiting from strong organic revenue growth, driven by strong volume across its business.

The company’s revenues for 2022 and 2023 are expected to increase 22.8% and 6.2% year over year, respectively. Its 2022 and 2023 earnings are expected to grow 44.9% and 5.4% year over year, respectively.

WEX’s Tailwinds

WEX’s top line continues to grow organically, driven by its extensive network of fuel and service providers, transaction volume growth, product excellence and marketing capabilities. In the second quarter of 2022, organic revenue growth was 22%.

Product and service quality and a deep understanding of customers’ operational needs have enabled the company to achieve revenue stability with the help of long-standing strategic relationships, multi-year contracts and high contract renewal rates. Revenues grew 30% in the second quarter of 2022.

WEX Inc. Revenue (TTM)

WEX Inc. Revenue (TTM)
WEX Inc. Revenue (TTM)

WEX Inc. revenue-ttm | WEX Inc. Quote

WEX has been actively acquiring and investing in companies in the United States as well as internationally to expand its product and service offerings, thereby boosting its revenue growth and enhancing scalability. The June 2021 acquisition of benefitexpress has expanded WEX’s offerings in benefits administration by bringing in a complementary suite of solutions to its Health offerings.

Some Risks

WEX’s current ratio at the end of the second quarter of 2022 was 1.16, lower than the current ratio of 1.21 reported at the end of the previous quarter. A decline in the current ratio is not desirable as it indicates that the company may have problems meeting its short-term debt obligations.

Zacks Rank and Stocks to Consider

WEX currently carries a Zacks Rank #3 (Hold).

Investors interested in the broader Zacks Business Services sector can consider some better-ranked stocks like Avis Budget Group, Inc. CAR, Genpact Limited G and CRA International, Inc. CRAI.

Avis Budget sports a Zacks Rank of 1 (Strong Buy) at present. CAR has an earnings growth rate of 108.4% for 2022. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avis Budget delivered a trailing four-quarter earnings surprise of 69.5%, on average.

Genpact carries a Zacks Rank #2 (Buy) at present. G has a long-term earnings growth expectation of 12.3%.

Genpact delivered a trailing four-quarter earnings surprise of 10.1%, on average.

CRA International carries a Zacks Rank of 2, currently. CRAI has a long-term earnings growth expectation of 14.3%.

CRAI delivered a trailing four-quarter earnings surprise of 26%, on average.

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