Here’s why you should keep WEX stocks in your portfolio
WEX Inc.WEX shares have risen massively by 58.8% in the last six months, clearly outperforming the rally of 11.4% Industry it belongs.
The company has an expected long-term earnings per share growth rate (three to five years) of 7.2%. Earnings are expected to grow 35.6% and 31.5% in 2021 and 2022, respectively.
Factors that support the rally
Acquisitions have acted as an important growth catalyst for WEX. The company has actively acquired and invested in companies both in the US and internationally in order to expand its range of products and services, thereby contributing to sales growth and improved scalability. The acquisition of Go Fuel Card in 2019 expanded the company’s fleet business to all EC locations in the US, Europe and Australia. Another acquisition, Discovery Benefits, has strengthened its position as a technology platform in the healthcare sector and enhanced its employee benefits platform. The Noventis buyout expanded WEX’s corporate payments business.
WEX’s Health and Employee Benefit Solutions business has done very well due to strong account management and payment processing. Revenue increased 6.3% year over year to $ 88.9 million in the fourth quarter of 2020.
WEX’s total debt to total capital ratio was 0.60 at the end of the fourth quarter of 2020, higher than the industry’s 0.38 and the previous quarter’s 0.58. A higher level of indebtedness indicates that the proportion of debt capital used to finance company assets is increasing, and with it the risk of insolvency.
Additionally, cash at the end of the quarter was $ 1.37 billion, well below its long-term debt level of $ 2.87 billion, underscoring that the company does not have enough cash to meet that debt burden . However, the liquidity level was sufficient to cover the short-term debt of USD 153 million.
Zack’s rank and stocks to consider
WEX currently has a Zacks rank 3 (Hold).
Some stocks ranked better in the broader zacks Business services Sector are The Interpublic group of companies IPG, Cross Country Healthcare CCRN and Charles River Associates CRAI, everyone wears a # 2 Zacks (Buy). You can see The full list of today’s Zacks # 1 Rank stocks can be found here.
Long-term expected earnings per share growth rates (three to five years) for Interpublic, Cross Country Healthcare and Charles River are 2.4%, 12% and 13%, respectively.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.