WEX’s 18.5% return over the past six months has outpaced the S&P 500 by 6.8%, and its stock price has climbed to $188.40 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy WEX? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does WEX Stock Spark Debate?
Originally founded in 1983 as Wright Express to serve the fleet card market, WEX (NYSE: WEX) provides payment processing and business solutions across fleet management, employee benefits, and corporate payments sectors.
Two Things to Like:
1. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
WEX’s EPS grew at 20.6% compounded annual growth rate over the last five years, higher than its 11.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for financial firms. Over a long period, financial firms with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.
Over the last five years, WEX has averaged an ROE of 18.2%, impressive for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows WEX has a strong competitive moat.
One Reason to Be Careful:
Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, market returns, and industry trends. WEX’s recent performance shows its demand has slowed as its annualized revenue growth of 2.8% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
Final Judgment
WEX has huge potential even though it has some open questions, and with its shares topping the market in recent months, the stock trades at 9.3× forward P/E (or $188.40 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than WEX
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