WEX Inc. WEX carries an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.
The company’s next five-year earnings growth is pegged at 14.4%, higher than the industry average of 13.5%. Earnings for 2019 and 2020 are expected to grow 10.5% and 14.8%, respectively.
Factors Aiding the Stock
WEX’s top line continues to grow organically, driven by its extensive network of fuel and service providers, transaction volume growth, product excellence, marketing capabilities, sales force productivity, and other strategic revenue generation efforts.
Robust demand for its payment processing, account servicing and transaction processing services along with operational efficiency has helped WEX to generate solid revenues and earnings.
The recent acquisition of Discovery Benefits boosted WEX’s position as a technology platform in the healthcare space and enhanced its employee benefits platform. It added $25 million to the company’s third-quarter Health and Employee Benefit Solutions revenues (up 54% year over year) of $83.3 million.
Another recent acquisition of Noventis strengthened WEX’s position as a corporate payments supplier. This acquisition was a driver of 20% year-over-year growth of the company’s Travel and Corporate Solutions revenues of $99.1 million.
Driven by these headwinds, the company’s stock gained a massive 47.7% year to date, outperforming the 45.8% rally of the industry it belongs to.
WEX has a debt-laden balance sheet and faces seasonal fluctuations in revenues. As of Sep 30, 2019, long-term debt was $2.7 billion, while cash and cash equivalents were $531.4 million. Nevertheless, we believe that product excellence, extensive network of fuel and service providers, and acquisitions bode well for the company in the long term.
Zacks Rank & Stocks to Consider
Currently, WEX carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Zacks Business Services sector are Cardtronics CATM, Global Payments GPN and Mastercard Inc. MA. While Cardtronics sports a Zacks Rank #1 (Strong Buy), Global Payments and Mastercard carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS (three to five years) growth rate for Cardtronics, Global Payments and Mastercard is 4%, 18% and 16%, respectively.
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