WEX has followed the market’s trajectory closely. The stock is down 5.7% to $151.37 per share over the past six months while the S&P 500 has lost 1.3%. This may have investors wondering how to approach the situation.
Is now the time to buy WEX, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is WEX Not Exciting?
Despite the more favorable entry price, we're cautious about WEX. Here are two reasons we avoid WEX and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, market returns, and industry trends. WEX’s recent performance shows its demand has slowed as its annualized revenue growth of 2.2% 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, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
WEX’s EPS grew at a weak 4.5% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 2.2% 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. After the recent drawdown, the stock trades at 8.8× forward P/E (or $151.37 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 one of our top digital advertising picks.
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