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3 Reasons Why You Should Retain WEX Stock in Your Portfolio
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WEX Inc.'s (WEX - Free Report) ongoing organic growth is powered by its expansive network of fuel and service providers, increasing transaction volumes, outstanding product quality, effective marketing, and a highly productive sales force. Furthermore, its U.S. healthcare business is thriving and in excellent condition. However, low liquidity remains a concern for the company.
Reasons to Hold
Acquisitions continue to serve as a key growth catalyst for the company. In 2021, WEX acquired certain contractual rights to serve as custodian or sub-custodian for more than $3 billion of HSAs from the HealthcareBank division of Bell Bank. This strategic move is increasing the company's role within its customer-directed healthcare ecosystem, aligning perfectly with its ongoing growth strategy.
The acquisition of benefitexpress is expanding the company's role in the healthcare ecosystem, bringing together benefit administration, compliance services, and consumer-directed health and lifestyle spending accounts to create a comprehensive benefits marketplace. In 2020, WEX made strategic acquisitions of eNett and Optal, each of which are strengthening the company's position in the global travel marketplace.
WEX has achieved revenue stability through its exceptional product quality, service excellence, and a profound grasp of customer operational requirements. The company maintains robust revenue streams via strategic alliances, extended contracts, and impressive contract renewal rates. WEX boasts a substantial customer base, co-branded partnerships with major U.S. fleet management firms, oil companies, and convenience store operators, sustaining its strong customer retention through private-label portfolios and value-added services.
WEX sustains organic growth through its vast network of fuel and service providers, increasing transaction volumes, product excellence, effective marketing, and a productive sales force. This, coupled with the high demand for payment processing, account servicing, and transaction processing services, as well as operational efficiency, have led to robust revenue and earnings growth. Additionally, strategic acquisitions are expected to further boost revenues, enhance product differentiation and improve scalability, thus aligning with the company's optimistic outlook for organic growth in all its segments.
Threats to WEX
WEX's current ratio at the end of second-quarter 2023 was pegged at 1.04, lower than the current ratio of 1.16 reported at the end of the year-ago quarter and 1.07 reported at the end of the previous quarter. This is less than its Financial Transaction Services industry’s current ratio of 1.28 during the second quarter of 2023. Decreasing current ratio does not bode well.
WEX’s geographical presence (North America, Europe, South America and Asia-Pacific) makes it vulnerable to the risks associated with foreign currency exchange rate fluctuations. As of Dec 31, 2022, the company transacted in more than 20 different currencies other than the U.S. dollar including Australian dollar, Canadian dollar, Euro, British pound sterling, New Zealand dollar and Brazilian real. Any appreciation or depreciation of the dollar versus these foreign currencies could impact the company’s financials. It incurred net foreign currency loss of $22.7 million in 2022.
WEX currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Here are a few better-ranked stocks from the broader Business Service sector that warrant a look:
DocuSign(DOCU - Free Report) beat the Zacks Consensus Estimate in all the four trailing quarters and has an earning surprise of 25.6%. The current consensus estimate for revenues indicates an 8.1% increase from the year-ago figure. The consensus mark for earnings is pegged at $2.52 per share, indicating 24.1% year-over-year growth. DOCU currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ABM Industries (ABM - Free Report) beat the Zacks Consensus Estimate in three of the four trailing quarters and matched on one instance. The average surprise is 2.64%.The consensus estimate for fiscal 2023 revenues is pegged at $8.08 billion, which is 4.2% higher than the year-ago reported figure. The consensus estimate for the bottom line is pegged at $3.51 per share, indicating a 4.1% year-over-year decline. ABM holds a Zacks Rank #2 (Buy).
Accenture (ACN - Free Report) carries a Zacks Rank of 2. The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $64.18 billion, which is 4.2% higher than the year-ago reported figure. The consensus estimate for ACN’s bottom line is pegged at $11.59 per share, indicating 4.2% year-over-year growth. It beat the consensus estimate in all the four trailing quarters, the average surprise being 5.7%.
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3 Reasons Why You Should Retain WEX Stock in Your Portfolio
WEX Inc.'s (WEX - Free Report) ongoing organic growth is powered by its expansive network of fuel and service providers, increasing transaction volumes, outstanding product quality, effective marketing, and a highly productive sales force. Furthermore, its U.S. healthcare business is thriving and in excellent condition. However, low liquidity remains a concern for the company.
Reasons to Hold
Acquisitions continue to serve as a key growth catalyst for the company. In 2021, WEX acquired certain contractual rights to serve as custodian or sub-custodian for more than $3 billion of HSAs from the HealthcareBank division of Bell Bank. This strategic move is increasing the company's role within its customer-directed healthcare ecosystem, aligning perfectly with its ongoing growth strategy.
The acquisition of benefitexpress is expanding the company's role in the healthcare ecosystem, bringing together benefit administration, compliance services, and consumer-directed health and lifestyle spending accounts to create a comprehensive benefits marketplace. In 2020, WEX made strategic acquisitions of eNett and Optal, each of which are strengthening the company's position in the global travel marketplace.
WEX has achieved revenue stability through its exceptional product quality, service excellence, and a profound grasp of customer operational requirements. The company maintains robust revenue streams via strategic alliances, extended contracts, and impressive contract renewal rates. WEX boasts a substantial customer base, co-branded partnerships with major U.S. fleet management firms, oil companies, and convenience store operators, sustaining its strong customer retention through private-label portfolios and value-added services.
WEX sustains organic growth through its vast network of fuel and service providers, increasing transaction volumes, product excellence, effective marketing, and a productive sales force. This, coupled with the high demand for payment processing, account servicing, and transaction processing services, as well as operational efficiency, have led to robust revenue and earnings growth. Additionally, strategic acquisitions are expected to further boost revenues, enhance product differentiation and improve scalability, thus aligning with the company's optimistic outlook for organic growth in all its segments.
Threats to WEX
WEX's current ratio at the end of second-quarter 2023 was pegged at 1.04, lower than the current ratio of 1.16 reported at the end of the year-ago quarter and 1.07 reported at the end of the previous quarter. This is less than its Financial Transaction Services industry’s current ratio of 1.28 during the second quarter of 2023. Decreasing current ratio does not bode well.
WEX’s geographical presence (North America, Europe, South America and Asia-Pacific) makes it vulnerable to the risks associated with foreign currency exchange rate fluctuations. As of Dec 31, 2022, the company transacted in more than 20 different currencies other than the U.S. dollar including Australian dollar, Canadian dollar, Euro, British pound sterling, New Zealand dollar and Brazilian real. Any appreciation or depreciation of the dollar versus these foreign currencies could impact the company’s financials. It incurred net foreign currency loss of $22.7 million in 2022.
WEX currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Here are a few better-ranked stocks from the broader Business Service sector that warrant a look:
DocuSign(DOCU - Free Report) beat the Zacks Consensus Estimate in all the four trailing quarters and has an earning surprise of 25.6%. The current consensus estimate for revenues indicates an 8.1% increase from the year-ago figure. The consensus mark for earnings is pegged at $2.52 per share, indicating 24.1% year-over-year growth. DOCU currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ABM Industries (ABM - Free Report) beat the Zacks Consensus Estimate in three of the four trailing quarters and matched on one instance. The average surprise is 2.64%.The consensus estimate for fiscal 2023 revenues is pegged at $8.08 billion, which is 4.2% higher than the year-ago reported figure. The consensus estimate for the bottom line is pegged at $3.51 per share, indicating a 4.1% year-over-year decline. ABM holds a Zacks Rank #2 (Buy).
Accenture (ACN - Free Report) carries a Zacks Rank of 2. The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $64.18 billion, which is 4.2% higher than the year-ago reported figure. The consensus estimate for ACN’s bottom line is pegged at $11.59 per share, indicating 4.2% year-over-year growth. It beat the consensus estimate in all the four trailing quarters, the average surprise being 5.7%.