WEX - Embedded Expectations Analysis - 2020 06 08
WEX Inc. (WEX:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 22.0x Uniform P/E. At these levels, the market has somewhat bearish expectations for the firm, and management may have concerns about volume growth, revenue guidance, and technologySpecifically, management may lack confidence in their ability to sustain increases in incremental revenue from EG fuel, net late fee and net interchange rates, and volume growth. Furthermore, they may have concerns about softer fleet business growth following the migration of Shell and Chevron and their ability to meet revenue growth guidance of 10%-15% for 2020. In addition, they may be downplaying concerns about the impact of coronavirus on their businesses in Hong Kong and Australia, and they may lack confidence in their ability to drive industry-leading technological advancements, pursue accretive M&A opportunities, and sustain strong business momentum. Moreover, they may be overstating the potential of their established channels in the health business, their ability to increase market share, and their technological competitiveness in the marketplace
Wex is a provider of corporate card payment solutions. The company operates in three business segments: Fleet Solutions, which provides payment, transaction processing and information management services specifically designed for the needs of commercial and government fleets; Travel and Corporate Solutions, which focuses on the payment environment of business-to-business payments, providing customers with payment processing solutions for their corporate payment and transaction monitoring needs; and Health and Employee Benefit Solutions, which provides a software-as-a-service platform for consumer directed healthcare payments, as well as payroll related benefits to customers in Brazil.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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