Shares of WEX Inc (WEX, Financial) experienced a significant drop of approximately 14.98% after the company reported Q3 2024 earnings that fell short of expectations. The reported revenue of $665 million, though a 2% increase year over year, missed the guidance range of $688 million to $698 million, leading to a reevaluation of the company's full-year projection due to lower-than-expected results influenced by falling fuel prices.
The decline in revenue guidance has notably impacted WEX's stock price. As a company that derives a portion of its income from fuel card transactions, Wex Inc's revenue is susceptible to fluctuations in fuel prices. The downturn in fuel prices caused a $21 million reduction in revenue for this quarter, prompting the company to adjust its year-end outlook from a minimum of $2.68 billion to a maximum of $2.63 billion.
Despite the drop in stock price to $181.13, WEX boasts certain strengths according to its financial metrics. The company's return on equity (ROE) stands at 13.91%, which indicates decent profitability relative to its equity. However, WEX is currently trading at a price-to-earnings (P/E) ratio of 31.34 and a price-to-book (P/B) ratio of 4.21, suggesting it is priced at a premium compared to some of its industry peers.
WEX Inc shows an expanding operating margin, a positive indicator for profitability. Additionally, the GF Value, a measure provided by GuruFocus, suggests that WEX is modestly undervalued with a GF Value of $222.03. For more details about the GF Value of WEX, you can visit GF Value.
Despite the current financial turbulence, WEX Inc has shown consistent growth in revenue per share, highlighting the company's ability to drive predictable growth in this aspect. However, there are cautionary signals including the company's financial strength, evidenced by an Altman Z-Score of 0.96, placing it in the distress zone, which signifies a possible bankruptcy risk within the next two years. The company's debt levels are also a concern, with new debt issuance of USD 814.572 million over the last three years.
Overall, while WEX faces challenges related to its recent financial results, it brings to the table predictability in revenue growth and the potential for improved profitability margins, which are key factors for investors to consider moving forward.
