WEX Inc.

WEX Inc. (NYSE: WEX) is a provider of financial technology services. Its current reportable segments are Fleet Solutions, Travel and Corporate Solutions, and Health and Employee Benefit Solutions. The Health and Employee Benefit Solutions business earns the vast majority of its income by selling consumer-directed healthcare payment products and processing via its US Software as a Service (SaaS) platforms.

Why Should Investors Exit?

• Leveraged Balance Sheet: At the end of September 30, 2021, the company's debt to equity ratio was 1.62x, which was too high compared to the industry norm of 0.50x. Furthermore, its long-term debt to Total Capital ratio was 55.8%, compared to the industry norm of 26.0%. This reflects the fact that the company is exposed to greater balance-sheet risk.
• High Average Payables and Receivables Days: In comparison to the industry, the company has a high average Accounts Payable days, implying that it takes longer to pay its suppliers. Payable days were 649.4 days at the end of September 30, 2021, compared to the industry median of 35.9 days. Furthermore, the firm also takes longer to receive payments from its customers. At the end of September 30, 2021, the company's average receivable days were 584.2 days, compared to the industry mean of 65.4 days.
• Technical Weakness: On the daily chart, WEX prices sustain above the horizontal trend line support zone and take the same support. Moreover, the momentum oscillator RSI (14-period) trading at ~59.56, reversing from the higher levels. However, On the weekly charts, the prices are trading below the trend-following indicators 50- period SMA, which may act as a resistance level for the stock.
  

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

In the past nine months, WEX stock price has fallen 20.06% and might fall even further from current levels to its 50 days moving average. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 142.25.

Considering the company's leveraged balance sheet risk, significantly high payable and receivable days, current valuation, and other technical indicators, we recommend a "Sell" rating on the stock at the current price of USD 158.80, down 2.29%, as of February 02, 2022, at 11:54 AM ET.

Three-Year Technical Price Chart (as of February 03, 2022; 11:54 AM ET). Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

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