WEX (NYSE:WEX), a fintech company that provides a range of services including payment processing solutions and employee benefit programs. recently announced its plans to utilize a combination of a $500 million note offering, a proposed $500 million term loan, and cash in hand to fund a $750 million share repurchase program, repay $250 million in revolving debt, and pay related fees and expenses. WEX stock surged 6% post the announcement.
After its recent rise, WEX stock looks fairly priced – making it an ambivalent pick to buy at its current price of around $160. We believe there are some minor concerns with WEX stock, which makes it fairly priced given that its current valuation looks moderate.
We arrive at our conclusion by comparing the current valuation of WEX stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of WEX along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operating performance and financial condition, as detailed below.
How does WEX’s valuation look vs. the S&P 500?
Going by what you pay per dollar of sales or profit, WEX stock is currently valued in line with the broader market.
• WEX has a price-to-sales (P/S) ratio of 2.8 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 10.8 compared to 24.4 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 12.3 vs. the benchmark’s 24.4
How have WEX’s revenues grown over recent years?
WEX’s Revenues have seen notable growth over recent years.
• WEX has seen its top line grow at an average rate of 18.0% over the last 3 years (vs. 9.8% for S&P 500)
• Its revenues have grown 6.1% from $2.5 Bil to $2.7 Bil in the last 12 months (vs. change of 5.6% for S&P 500)
• Also, its quarterly revenues grew 2.2% to $666 Mil in the most recent quarter from $651 Mil a year ago (vs. 7.2% change for S&P 500)
How profitable is WEX?
WEX’s profit margins are much higher than most companies in the Trefis coverage universe.
• WEX’s Operating Income over the last four quarters was $688 Mil, which represents a high Operating Margin of 25.9% (vs. 12.6% for S&P 500)
• WEX’s Operating Cash Flow (OCF) over this period was $605 Mil, pointing to a high OCF-to-Sales Ratio of 22.8% (vs. 14.4% for S&P 500)
Does WEX look financially stable?
WEX’s balance sheet looks strong.
• WEX’s Debt figure was $4.6 Bil at the end of the most recent quarter, while its market capitalization is $6.4 Bil (as of 2/25/2025). This implies a poor Debt-to-Equity Ratio of 61.8% (vs. 19.7% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $4.3 Bil of the $14 Bil in Total Assets for WEX. This yields a very strong Cash-to-Assets Ratio of 30.5% (vs. 14.1% for S&P 500)
How resilient is WEX stock during a downturn?
WEX stock has fared worse than the benchmark S&P 500 index during the last 2 economic downturns. Worried about the impact of a market crash on WEX stock? Our dashboard How Low Can WEX Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.
COVID Recession (February to April 2020)
• WEX stock fell 64.6% from a high of $235.13 on 20 February 2020 to $83.23 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Covid peak by 20 March 2024 – taking 1458 days to recover while the S&P 500 took 148 days
• Since then, the stock has increased to a high of $242.22 on 3 April 2024 and currently trades at around $160
Great Recession (December 2007 to June 2009)
• During the 2007-09 recession, WEX stock fell from a peak value of $40.82 on 14 November 2007 to $8.59 on 23 November 2008 a decline of 79.0%(vs. a peak-to-trough decline of 56.8% for the S&P 500)
• However, the stock fully recovered to its pre-recession peak by 9 August 2011 – taking 989 days to recoup its losses vs. the 1480 days taken by the S&P 500 to recover
Putting all the pieces together: What it means for WEX stock
In summary, WEX’s performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Very Strong
• Financial Stability: Strong
• Downturn Resilience: Very Weak
• Overall: Strong
This is aligned with the stock’s moderate valuation because of which we think it is fairly priced, which supports our conclusion that WEX is an ambivalent stock to buy.
While it doesn’t look like there is much upside to WEX stock, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that?The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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