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Here's Why You Should Hold WEX Stock in Your Portfolio Now
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A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
Here we discuss about WEX Inc. (WEX - Free Report) , a company that has an expected long-term earnings per share growth rate of 15%. Moreover, its earnings are expected to register 51.6% growth in 2018 and 16.9% in 2019.
Also, the company outperformed the industry it belongs to in the past year. Shares of WEX have gained 19%, which compares favorably with 14.6% rise of the industry in the said time frame.
However, the company faces its share of headwinds. Factors like high debt and seasonality pose significant threat to the company’s operations. Despite these headwinds, we believe that the company has enough positives, which justify its retention in investors’ portfolio.
Solid Organic Growth
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. Organic revenue growth was 8.4% in the last reported quarter. Strategic acquisitions complement the company’s organic growth by contributing to revenues, adding differentiation to its products and service offerings and enhancing scalability. WEX remains highly optimistic about organic growth opportunities across each of its segments.
Strategic Acquisitions
Acquisitions have been one of the key catalysts for WEX. On Oct 22, WEX announced a deal to acquire Noventis, an electronic payments network. The purchase of Noventis is expected to expand WEX’s corporate payments business.
In October 2017, WEX had purchased certain assets and assumed certain liabilities of AOC, a provider of commercial payments technology, to strengthen its technological capabilities. In 2016, the company acquired EFS, a provider of customized payment solutions for fleet and corporate customers to enhance its fleet solutions suite.
Apart from contributing to revenue growth, these buyouts have added differentiation to WEX’s products and services offerings, thereby enhancing scalability.
Increasing Operating Income
WEX has been continually undertaking efforts to optimize its activities and cost structure, and capture new revenue generating opportunities across its businesses. We believe these efforts have helped WEX achieve operating income growth. In third-quarter 2018, operating income increased 58% year over year to $100.69 million. Operating income margin rose to 26.3% from 19.7% in the prior-year quarter. The better figures indicate management’s efficient execution in recent times.
Some better-ranked stocks in the broader Zacks Business Services sector are The Interpublic Group of Companies, Inc. (IPG - Free Report) , Accenture plc (ACN - Free Report) and Automatic Data Processing Inc. (ADP - Free Report) , each carrying a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rate for Interpublic, Accenture and Automatic Data Processing is 7.4%, 10.3% and 12.5%, respectively.
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Here's Why You Should Hold WEX Stock in Your Portfolio Now
A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
Here we discuss about WEX Inc. (WEX - Free Report) , a company that has an expected long-term earnings per share growth rate of 15%. Moreover, its earnings are expected to register 51.6% growth in 2018 and 16.9% in 2019.
Also, the company outperformed the industry it belongs to in the past year. Shares of WEX have gained 19%, which compares favorably with 14.6% rise of the industry in the said time frame.
However, the company faces its share of headwinds. Factors like high debt and seasonality pose significant threat to the company’s operations. Despite these headwinds, we believe that the company has enough positives, which justify its retention in investors’ portfolio.
Solid Organic Growth
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. Organic revenue growth was 8.4% in the last reported quarter. Strategic acquisitions complement the company’s organic growth by contributing to revenues, adding differentiation to its products and service offerings and enhancing scalability. WEX remains highly optimistic about organic growth opportunities across each of its segments.
Strategic Acquisitions
Acquisitions have been one of the key catalysts for WEX. On Oct 22, WEX announced a deal to acquire Noventis, an electronic payments network. The purchase of Noventis is expected to expand WEX’s corporate payments business.
In October 2017, WEX had purchased certain assets and assumed certain liabilities of AOC, a provider of commercial payments technology, to strengthen its technological capabilities. In 2016, the company acquired EFS, a provider of customized payment solutions for fleet and corporate customers to enhance its fleet solutions suite.
Apart from contributing to revenue growth, these buyouts have added differentiation to WEX’s products and services offerings, thereby enhancing scalability.
Increasing Operating Income
WEX has been continually undertaking efforts to optimize its activities and cost structure, and capture new revenue generating opportunities across its businesses. We believe these efforts have helped WEX achieve operating income growth. In third-quarter 2018, operating income increased 58% year over year to $100.69 million. Operating income margin rose to 26.3% from 19.7% in the prior-year quarter. The better figures indicate management’s efficient execution in recent times.
Zacks Rank & Stocks to Consider
Currently, WEX is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are The Interpublic Group of Companies, Inc. (IPG - Free Report) , Accenture plc (ACN - Free Report) and Automatic Data Processing Inc. (ADP - Free Report) , each carrying a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rate for Interpublic, Accenture and Automatic Data Processing is 7.4%, 10.3% and 12.5%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>