Shares of this payments firm can nearly triple from here, says Impactive’s Lauren Taylor Wolfe
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Lauren Taylor Wolfe from Impactive Capital, managing partner of Impactive Capital said that Wex’s shares could almost triple by 2025. This is as Wex expands and seizes on new opportunities within its three main business segments. Lauren Wolfe spoke Thursday at the Sohn Investment Conference. The current stock price is $174. It trades at 13 times its forward earnings. That’s a decrease of about 20 times its average over the previous decade. Taylor Wolfe said that it may reach $500 per share over the next three year. Following the event, she said that there was a “great opportunity” for double or triple growth in our base and upside cases. According to Taylor Wolfe’s estimates, the company will generate $4.5 billion through debt and free cash flow over three years. She stated that the money could be used to repurchase shares or for mergers and acquisitions in its three main business segments. Wex’s future success will depend on its fleet management and corporate payments, as well as the travel and healthcare sectors that are expected to continue growing in the long-term. Taylor Wolfe specifically sees huge revenue opportunities within the fleet segment — which has a decades-long record of “double-digit top and bottom-line growth throughout cycles” —amid the transition to more electric vehicles. She stated that Wex is in an advantageous position because it has access to analytics and data which will allow for significantly higher economics per vehicle. New subscription products with greater pricing power and innovation will generate recurring revenue streams that are more quality, possibly even surpassing doubling the unit economics. Taylor Wolfe anticipates Wex’s fleet segment will increase EBITDA by the single digits over the coming years. The business model also performs well in inflationary periods. Impactive calculations show that the company is worth Wex’s total enterprise value. Taylor Wolfe believes there is value in Wex’s corporate and travel payments, as well. The company offers virtual cards and automated corporate payment services. As travel returns increase and companies move away from checks and cash, she expects that the company will grow in the “healthy two-digits”. Wex’s Health segment, which is also well-positioned for inflation mitigation and revenue growth due to increasing health care costs, will be growing in the future. She said that this sector trades at roughly 70% off its counterpart in HealthEquity, which is the current company multiple. This segment is a hidden gem within Wex Enterprise, she stated. She said that expanding the electric vehicle section to provide more data and analysis to customers could bring in approximately 70% more revenue per car. Wex’s shares have risen more than 26%, but are down 15% from its 52-week peak of $208.38.
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