WEX - Embedded Expectations Analysis - 2020 06 29
WEX Inc. (WEX:USA) currently trades near recent averages relative to UAFRS-based (Uniform) earnings, with a 23.6x Uniform P/E. At these levels, the market has expectations for profitability to remain stable, but management may have concerns about revenue and earnings growth, their leverage ratio, and their eNett and Optal acquisition terminationSpecifically, management may lack confidence in their ability to sustain net late fee increases by driving new business wins and maintain revenue and earnings growth amidst coronavirus-driven headwinds. Furthermore, they may have concerns about headwinds related to backing out of the eNett and Optal acquisition, as well as related litigation, and about the state of the health care supply chain. In addition, management may lack confidence in their ability to maintain their leverage ratio, and they may be exaggerating their liquidity position and ability to grow and serve customers post-coronavirus. Finally, they may lack confidence in their ability to mitigate credit losses
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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