Is WEX Fairly Priced After 6.9% Weekly Surge and Industry Consolidation News?

• Wondering if WEX is a hidden bargain or just fairly priced? You are not alone. Digging into its true value takes a deeper dive than just glancing at share charts.
• The stock has seen a notable 6.9% gain over the past week, but that stands out in contrast to a year-to-date drop of 15.1% and a significant 21.7% decline over the last year.
• Recent headlines have focused on industry consolidation and regulatory shifts, drawing investors' attention to the payment solutions sector. As these broader themes play out, WEX’s price fluctuations seem to reflect both excitement about long-term growth and some uncertainty about what is around the corner.
• According to valuation checks, WEX scores a 2 out of 6 for being undervalued. Is there more than meets the eye? Let’s break down the numbers using traditional valuation approaches, while keeping an eye out for a smarter way to judge value by the end of this article.

WEX scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: WEX Excess Returns Analysis

The Excess Returns valuation model provides insight by analyzing how much value WEX generates beyond the required cost of equity. In other words, it measures whether the company’s profitability exceeds what investors expect for the risk taken on. This approach places return on equity and projected growth at the center of its analysis.

For WEX, the numbers are notable. The company’s Book Value is $32.61 per share, with a Stable Book Value projected to rise to $50.25 per share according to future estimates from four analysts. WEX’s Stable EPS is estimated at $21.81 per share, based on weighted projections from five analysts. With an average return on equity of 43.41%, WEX significantly exceeds its calculated Cost of Equity of $4.66 per share, resulting in a substantial Excess Return of $17.15 per share.

Based on the Excess Returns model, the estimated intrinsic value for WEX suggests the stock is 55.7% undervalued compared to its current price. This finding indicates the market may not fully recognize the company’s ability to generate higher returns on invested capital over time.

Result: UNDERVALUED

Our Excess Returns analysis suggests WEX is undervalued by 55.7%. Track this in your watchlist or portfolio, or discover 933 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for WEX.

Approach 2: WEX Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used metric for valuing established, profitable companies like WEX. It offers a direct comparison between what investors are willing to pay for each dollar of earnings, making it a reliable gauge for businesses with consistent profitability.

Growth expectations and perceived risk have a big impact on what is considered a "fair" PE ratio. Companies with higher projected growth or lower risk profiles often trade at higher multiples, while those with lower growth or higher risk warrant lower ones. Context is key when determining if a stock is fairly valued using this measure.

Currently, WEX trades at a PE of 18x. This is higher than the industry average of 13.6x and its peer group average of 16.7x. However, Simply Wall St introduces the concept of a “Fair Ratio,” which is a PE of 17.4x for WEX. This Fair Ratio is tailored to the company’s specific fundamentals, including its earnings growth, profit margins, risk profile, industry, and market capitalization. Compared to simply looking at the average for peers or the industry, this Fair Ratio gives a more precise view of value because it factors in all the nuances unique to WEX.

Given that WEX’s current PE ratio is only slightly above its Fair Ratio (18x vs 17.4x), the stock appears to be priced about right based on this method.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your WEX Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your personal storyline about a company, connecting the facts and figures, such as your assumptions on fair value, future revenue, earnings, and margins, with your bigger picture perspective on its potential and risks.

Think of it as linking a company’s story to your financial forecast and then to a fair value estimate, giving context and confidence to your investment decisions. Narratives make this process easy and accessible, and you can explore them right now on Simply Wall St's Community page, where millions of investors share and compare their perspectives.

Using Narratives, you can quickly see how your fair value stands up against the current stock price and decide if it’s time to buy, sell, or wait. What makes Narratives especially powerful is that they are kept up-to-date with the latest news, earnings, and data changes, so your viewpoint evolves along with the company.

For WEX, one Narrative might highlight expanding digital payments and new partnerships to justify a higher value, while another could focus on industry disruption risks and assign a more cautious, lower outlook. The essential point is that Narratives allow you to put your story behind the numbers and invest with greater clarity.

Do you think there's more to the story for WEX? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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