Here's Why You Should Retain WEX Stock in Your Portfolio
WEX's revenue stability is being aided by its product and service quality, as well as its deep understanding of customers' operational needs.
WEX Inc. WEX has an impressive Growth Score of A. This style score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth.
The company has an expected long-term (three to five years) earnings per share growth rate of 27.1%. Its earnings for 2021 and 2022 are expected to grow 21.6% and 4.8% year over year, respectively.
The stock has gained 11% over the past year, against 8.9% decline of the industry it belongs to.
Factors That Auger Well
Product and service quality, deep understanding of customers’ operational needs, long-standing strategic relationships, multi-year contracts, and high contract renewal rates have helped WEX achieve revenue stability. The company has a large customer base and co-branded strategic relationships with some of the largest U.S. fleet management providers, as well as with numerous oil companies and convenience store operators. WEX’s customer retention rate remains healthy, driven by strength in its private-label portfolios, and value-added product and service offerings.
Acquisitions have acted as a key growth catalyst for the company. WEX has been actively acquiring and investing in businesses, both in the United States as well as internationally, to expand its product and service offerings, thereby contributing to revenue growth and enhancing scalability. The recent acquisition of benefitexpress is expected to extend WEX’s health and employee benefits’ products and services across the employer clients. In 2020, WEX made acquisitions of eNett and Optal, both expected to strengthen the company’s position in the global travel marketplace.
Debt Woe Stays
WEX’s cash and cash equivalent balance of $1 billion at the end of the second-quarter 2021 was well below the long-term debt level of $2.9 billion. This underscores that the company doesn’t have enough cash to meet this debt burden. Nevertheless, the cash level can meet the short-term debt of $146 million.
Zacks Rank and Stocks to Consider
WEX currently carries a Zacks Rank #3 (Hold).
The long-term expected earnings per share (three to five years) growth rate for Cross Country Healthcare, Equifax and TransUnion is 9.9%, 15.2% and 22%, respectively.
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