WEX has been treading water for the past six months, recording a small loss of 3.5% while holding steady at $145.93. The stock also fell short of the S&P 500’s 11% gain during that period.
Is there a buying opportunity in WEX, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is WEX Not Exciting?
We’re cautious about WEX. Here are two reasons why WEX doesn’t excite us, plus one stock we’d rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. WEX’s recent performance shows its demand has slowed as its annualized revenue growth of 2.1% 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.
2. Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
WEX’s EPS grew at an unimpressive 6% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 2.1% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
WEX isn’t a terrible business, but it doesn’t pass our bar. With its shares trailing the market in recent months, the stock trades at 7.5× forward P/E (or $145.93 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We’re fairly confident there are better stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of WEX
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