Stock Analysis
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WEX's (NYSE:WEX) three-year total shareholder returns outpace the underlying earnings growth
It might be of some concern to shareholders to see the WEX Inc. (NYSE:WEX) share price down 15% in the last month. But at least the stock is up over the last three years. In that time, it is up 56%, which isn't bad, but not amazing either.
Although WEX has shed US$977m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Check out our latest analysis for WEX
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During three years of share price growth, WEX achieved compound earnings per share growth of 27% per year. This EPS growth is higher than the 16% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We're pleased to report that WEX shareholders have received a total shareholder return of 7.1% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.4% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with WEX .
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
What are the risks and opportunities for WEX?
WEX Inc. operates a commerce platform in the United States and internationally.
Rewards
Trading at 26.3% below our estimate of its fair value
Earnings are forecast to grow 37.98% per year
Earnings grew by 146935% over the past year
Risks
Significant insider selling over the past 3 months
Large one-off items impacting financial results
Further research on
WEX
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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.
About NYSE:WEX
WEX
WEX Inc. operates a commerce platform in the United States and internationally.
Excellent balance sheet with reasonable growth potential.
