WEX Inc. WEX stock has had an impressive run over the past three months. Shares of the company have gained 11.1% compared with the 6.1% growth of the industry it belongs to and the marginal rise of the Zacks S&P 500 composite.
The company’s revenues for 2024 are expected to improve 6% year over year, and for 2025, it is anticipated to increase 6.4% year over year. Earnings are anticipated to increase 9.2% in 2024 and 12.9% in 2025. The company has an expected long-term (three to five years) earnings per share growth rate of 12.2%.
Factors That Auger Well for WEX’s Future Success
WEX’s top line experiences organic growth, driven by its extensive network of fuel and service providers, transaction volume growth, product quality, marketing effort and sales force productivity. Strong demand for its payment processing, account servicing and transaction processing services, coupled with operational efficiency, has assisted the company in generating solid revenues and earnings growth.
WEX Inc. Revenue (TTM)
WEX Inc. revenue-ttm | WEX Inc. Quote
The company has signed several expansions and new agreements with fintech companies, including Upgrades, Jack Henry and Allied Payment Network during the second quarter of 2024. This positions WEX’s corporate payments business well with the competitive offerings of the industry for the long run, underpinned by a top-notch virtual card solution and strong long-term client relationships.
Strategic acquisitions made by WEX support its organic growth by contributing to revenues, adding products and service differentiation, and improving scalability. The company is positive about its organic growth opportunities across each of its segments.
WEX’s buyouts serve as a key growth catalyst. In 2024, the company acquired Sawatch Labs, a fleet electrification analytics software startup. WEX finds the acquired company to have the potential to advance WEX’s ability to support the customers via its EV evaluation processes.
In 2023, the company acquired Payzer, a high-growth, cloud-based and field service management software provider. The acquisition boosted WEX’s growth strategy of expanding its products and creating opportunities for additional cross-selling by providing a new, scalable SaaS solution for 150,000 small business customers who are field service providers.
Risks Faced by WEX
Seasonality affects WEX’s businesses. Fuel prices are higher during the summer, which benefits the mobility segment. The corporate payments segment gains from higher online travel sales during the third quarter. The benefits segment experiences seasonality in terms of consumer spending, which is correlated with insurance deductibles that are higher at the beginning of the year.
WEX's current ratio (a measure of liquidity) at the end of the second quarter of 2024 was pegged at 1.04, lower than the preceding quarter's 1.06. A decreasing current ratio does not bode well.
Zacks Rank & Stocks to Consider
WEX carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks from the broader Zacks Business Services sector are Docusign DOCU and Maplebear Inc. CART.
Docusign sports a Zacks Rank of 1 (Strong Buy) at present. It has a long-term earnings growth expectation of 9.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DOCU delivered a trailing four-quarter earnings surprise of 18.3%, on average.
Maplebear flaunts a Zacks Rank of 1 at present. It has a long-term earnings growth expectation of 27.5%.
CART delivered a trailing four-quarter earnings surprise of 414.6%, on average.
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