Intrinsic value of WEX - WEX

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$102.53

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$102.53

 
Intrinsic value

$478.18

 
Up/down potential

+366%

 
Rating

str. buy

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of WEX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 4.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.06
  36.60
  33.44
  30.60
  28.04
  25.73
  23.66
  21.79
  20.11
  18.60
  17.24
  16.02
  14.92
  13.92
  13.03
  12.23
  11.51
  10.86
  10.27
  9.74
  9.27
  8.84
  8.46
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
Revenue, $m
  1,018
  1,391
  1,856
  2,423
  3,103
  3,901
  4,824
  5,876
  7,057
  8,370
  9,813
  11,385
  13,084
  14,906
  16,848
  18,908
  21,084
  23,373
  25,773
  28,284
  30,906
  33,639
  36,484
  39,443
  42,520
  45,718
  49,041
  52,494
  56,083
  59,815
  63,696
Variable operating expenses, $m
 
  951
  1,207
  1,520
  1,895
  2,335
  2,844
  3,424
  4,076
  4,800
  5,595
  6,278
  7,215
  8,220
  9,291
  10,427
  11,627
  12,889
  14,213
  15,597
  17,043
  18,550
  20,119
  21,751
  23,448
  25,211
  27,044
  28,948
  30,927
  32,985
  35,125
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  823
  951
  1,207
  1,520
  1,895
  2,335
  2,844
  3,424
  4,076
  4,800
  5,595
  6,278
  7,215
  8,220
  9,291
  10,427
  11,627
  12,889
  14,213
  15,597
  17,043
  18,550
  20,119
  21,751
  23,448
  25,211
  27,044
  28,948
  30,927
  32,985
  35,125
Operating income, $m
  195
  440
  649
  903
  1,208
  1,566
  1,980
  2,452
  2,982
  3,571
  4,218
  5,107
  5,869
  6,686
  7,557
  8,481
  9,457
  10,484
  11,561
  12,687
  13,863
  15,089
  16,365
  17,692
  19,072
  20,507
  21,997
  23,546
  25,156
  26,830
  28,571
EBITDA, $m
  337
  703
  938
  1,225
  1,569
  1,972
  2,439
  2,970
  3,568
  4,231
  4,961
  5,756
  6,614
  7,535
  8,517
  9,559
  10,659
  11,816
  13,029
  14,299
  15,624
  17,006
  18,444
  19,940
  21,496
  23,112
  24,792
  26,538
  28,352
  30,239
  32,201
Interest expense (income), $m
  116
  144
  255
  393
  561
  761
  998
  1,270
  1,581
  1,931
  2,319
  2,746
  3,211
  3,713
  4,252
  4,826
  5,435
  6,079
  6,755
  7,465
  8,208
  8,983
  9,791
  10,632
  11,507
  12,417
  13,363
  14,345
  15,367
  16,428
  17,531
Earnings before tax, $m
  87
  296
  393
  511
  647
  805
  983
  1,181
  1,400
  1,640
  1,899
  2,361
  2,658
  2,973
  3,306
  3,655
  4,022
  4,405
  4,805
  5,222
  5,655
  6,106
  6,574
  7,060
  7,565
  8,089
  8,634
  9,201
  9,790
  10,402
  11,039
Tax expense, $m
  30
  80
  106
  138
  175
  217
  265
  319
  378
  443
  513
  638
  718
  803
  893
  987
  1,086
  1,189
  1,297
  1,410
  1,527
  1,649
  1,775
  1,906
  2,043
  2,184
  2,331
  2,484
  2,643
  2,809
  2,981
Net income, $m
  61
  216
  287
  373
  473
  587
  717
  862
  1,022
  1,197
  1,386
  1,724
  1,940
  2,170
  2,413
  2,668
  2,936
  3,216
  3,508
  3,812
  4,128
  4,457
  4,799
  5,154
  5,522
  5,905
  6,303
  6,717
  7,146
  7,594
  8,059

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  191
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,997
  7,946
  10,603
  13,848
  17,730
  22,292
  27,567
  33,575
  40,328
  47,830
  56,077
  65,059
  74,764
  85,175
  96,275
  108,048
  120,481
  133,559
  147,276
  161,625
  176,606
  192,221
  208,478
  225,390
  242,972
  261,245
  280,233
  299,966
  320,477
  341,801
  363,978
Adjusted assets (=assets-cash), $m
  5,806
  7,946
  10,603
  13,848
  17,730
  22,292
  27,567
  33,575
  40,328
  47,830
  56,077
  65,059
  74,764
  85,175
  96,275
  108,048
  120,481
  133,559
  147,276
  161,625
  176,606
  192,221
  208,478
  225,390
  242,972
  261,245
  280,233
  299,966
  320,477
  341,801
  363,978
Revenue / Adjusted assets
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
Average production assets, $m
  1,022
  1,395
  1,861
  2,431
  3,112
  3,913
  4,839
  5,893
  7,079
  8,395
  9,843
  11,420
  13,123
  14,950
  16,899
  18,965
  21,147
  23,443
  25,851
  28,369
  30,999
  33,740
  36,593
  39,562
  42,648
  45,855
  49,188
  52,652
  56,252
  59,995
  63,887
Working capital, $m
  0
  -146
  -195
  -254
  -326
  -410
  -507
  -617
  -741
  -879
  -1,030
  -1,195
  -1,374
  -1,565
  -1,769
  -1,985
  -2,214
  -2,454
  -2,706
  -2,970
  -3,245
  -3,532
  -3,831
  -4,142
  -4,465
  -4,800
  -5,149
  -5,512
  -5,889
  -6,281
  -6,688
Total debt, $m
  2,205
  3,752
  5,774
  8,243
  11,198
  14,670
  18,683
  23,255
  28,394
  34,104
  40,380
  47,215
  54,600
  62,523
  70,970
  79,930
  89,391
  99,344
  109,782
  120,702
  132,102
  143,985
  156,357
  169,227
  182,606
  196,512
  210,963
  225,979
  241,588
  257,815
  274,692
Total liabilities, $m
  4,500
  6,047
  8,069
  10,538
  13,493
  16,965
  20,978
  25,550
  30,689
  36,399
  42,675
  49,510
  56,895
  64,818
  73,265
  82,225
  91,686
  101,639
  112,077
  122,997
  134,397
  146,280
  158,652
  171,522
  184,901
  198,807
  213,258
  228,274
  243,883
  260,110
  276,987
Total equity, $m
  1,497
  1,899
  2,534
  3,310
  4,237
  5,328
  6,588
  8,024
  9,638
  11,431
  13,402
  15,549
  17,869
  20,357
  23,010
  25,824
  28,795
  31,921
  35,199
  38,628
  42,209
  45,941
  49,826
  53,868
  58,070
  62,437
  66,976
  71,692
  76,594
  81,690
  86,991
Total liabilities and equity, $m
  5,997
  7,946
  10,603
  13,848
  17,730
  22,293
  27,566
  33,574
  40,327
  47,830
  56,077
  65,059
  74,764
  85,175
  96,275
  108,049
  120,481
  133,560
  147,276
  161,625
  176,606
  192,221
  208,478
  225,390
  242,971
  261,244
  280,234
  299,966
  320,477
  341,800
  363,978
Debt-to-equity ratio
  1.473
  1.980
  2.280
  2.490
  2.640
  2.750
  2.840
  2.900
  2.950
  2.980
  3.010
  3.040
  3.060
  3.070
  3.080
  3.100
  3.100
  3.110
  3.120
  3.120
  3.130
  3.130
  3.140
  3.140
  3.140
  3.150
  3.150
  3.150
  3.150
  3.160
  3.160
Adjusted equity ratio
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239
  0.239

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  61
  216
  287
  373
  473
  587
  717
  862
  1,022
  1,197
  1,386
  1,724
  1,940
  2,170
  2,413
  2,668
  2,936
  3,216
  3,508
  3,812
  4,128
  4,457
  4,799
  5,154
  5,522
  5,905
  6,303
  6,717
  7,146
  7,594
  8,059
Depreciation, amort., depletion, $m
  142
  263
  290
  322
  361
  406
  459
  519
  586
  661
  743
  649
  746
  849
  960
  1,078
  1,202
  1,332
  1,469
  1,612
  1,761
  1,917
  2,079
  2,248
  2,423
  2,605
  2,795
  2,992
  3,196
  3,409
  3,630
Funds from operations, $m
  -593
  479
  577
  695
  833
  994
  1,176
  1,381
  1,608
  1,858
  2,129
  2,372
  2,686
  3,020
  3,373
  3,746
  4,138
  4,548
  4,977
  5,424
  5,890
  6,374
  6,878
  7,402
  7,946
  8,511
  9,098
  9,708
  10,343
  11,002
  11,689
Change in working capital, $m
  -442
  -39
  -49
  -60
  -71
  -84
  -97
  -110
  -124
  -138
  -152
  -165
  -178
  -191
  -204
  -216
  -228
  -240
  -252
  -264
  -275
  -287
  -299
  -311
  -323
  -336
  -349
  -363
  -377
  -392
  -408
Cash from operations, $m
  -151
  930
  626
  754
  905
  1,077
  1,273
  1,491
  1,732
  1,996
  2,281
  2,538
  2,864
  3,211
  3,577
  3,962
  4,366
  4,788
  5,229
  5,687
  6,165
  6,661
  7,177
  7,712
  8,269
  8,846
  9,447
  10,071
  10,719
  11,394
  12,096
Maintenance CAPEX, $m
  0
  -58
  -79
  -106
  -138
  -177
  -222
  -275
  -335
  -402
  -477
  -559
  -649
  -746
  -849
  -960
  -1,078
  -1,202
  -1,332
  -1,469
  -1,612
  -1,761
  -1,917
  -2,079
  -2,248
  -2,423
  -2,605
  -2,795
  -2,992
  -3,196
  -3,409
New CAPEX, $m
  -66
  -373
  -466
  -569
  -681
  -801
  -926
  -1,055
  -1,185
  -1,317
  -1,448
  -1,577
  -1,703
  -1,827
  -1,948
  -2,067
  -2,182
  -2,296
  -2,408
  -2,519
  -2,629
  -2,741
  -2,854
  -2,968
  -3,086
  -3,207
  -3,333
  -3,464
  -3,600
  -3,743
  -3,893
Cash from investing activities, $m
  -1,160
  -431
  -545
  -675
  -819
  -978
  -1,148
  -1,330
  -1,520
  -1,719
  -1,925
  -2,136
  -2,352
  -2,573
  -2,797
  -3,027
  -3,260
  -3,498
  -3,740
  -3,988
  -4,241
  -4,502
  -4,771
  -5,047
  -5,334
  -5,630
  -5,938
  -6,259
  -6,592
  -6,939
  -7,302
Free cash flow, $m
  -1,311
  498
  80
  79
  85
  100
  125
  162
  212
  277
  356
  402
  512
  638
  779
  936
  1,106
  1,291
  1,489
  1,700
  1,923
  2,159
  2,406
  2,665
  2,935
  3,216
  3,508
  3,812
  4,128
  4,455
  4,795
Issuance/(repayment) of debt, $m
  969
  1,631
  2,022
  2,469
  2,954
  3,472
  4,014
  4,572
  5,139
  5,709
  6,276
  6,836
  7,385
  7,923
  8,447
  8,960
  9,461
  9,953
  10,438
  10,920
  11,400
  11,883
  12,372
  12,870
  13,380
  13,906
  14,450
  15,017
  15,608
  16,227
  16,877
Issuance/(repurchase) of shares, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,216
  1,631
  2,022
  2,469
  2,954
  3,472
  4,014
  4,572
  5,139
  5,709
  6,276
  6,836
  7,385
  7,923
  8,447
  8,960
  9,461
  9,953
  10,438
  10,920
  11,400
  11,883
  12,372
  12,870
  13,380
  13,906
  14,450
  15,017
  15,608
  16,227
  16,877
Total cash flow (excl. dividends), $m
  -89
  2,129
  2,102
  2,548
  3,040
  3,572
  4,139
  4,734
  5,351
  5,986
  6,632
  7,237
  7,897
  8,561
  9,227
  9,895
  10,567
  11,244
  11,927
  12,620
  13,324
  14,042
  14,778
  15,534
  16,315
  17,122
  17,959
  18,829
  19,736
  20,683
  21,672
Retained Cash Flow (-), $m
  -414
  -509
  -635
  -775
  -928
  -1,090
  -1,261
  -1,436
  -1,614
  -1,793
  -1,971
  -2,147
  -2,319
  -2,488
  -2,653
  -2,814
  -2,971
  -3,126
  -3,278
  -3,429
  -3,580
  -3,732
  -3,886
  -4,042
  -4,202
  -4,367
  -4,538
  -4,716
  -4,902
  -5,096
  -5,300
Prev. year cash balance distribution, $m
 
  107
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,727
  1,467
  1,773
  2,112
  2,481
  2,878
  3,298
  3,737
  4,193
  4,661
  5,090
  5,578
  6,073
  6,574
  7,081
  7,596
  8,118
  8,649
  9,190
  9,743
  10,310
  10,892
  11,493
  12,113
  12,754
  13,421
  14,113
  14,834
  15,586
  16,371
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  1,586
  1,227
  1,339
  1,426
  1,485
  1,509
  1,499
  1,454
  1,379
  1,279
  1,148
  1,019
  884
  749
  621
  502
  397
  306
  230
  169
  120
  83
  56
  37
  23
  14
  8
  5
  3
  1
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

WEX Inc. provides corporate card payment solutions in North and South America, the Asia Pacific, and Europe. The company’s Fleet Payment Solutions segment offers fleet vehicle payment and transaction processing services. Its services include customer, account activation, and account retention services; authorization and billing inquiries, and account maintenance services; premium fleet services; credit and collections services; and merchant services. This segment markets its products directly to commercial and government vehicle fleet customers with small, medium, and large fleets, as well as with over-the-road and long haul fleets; and indirectly through co-branded and private label relationships. Its Travel and Corporate Solutions segment provides payment processing solutions for corporate payment and transaction monitoring needs. Its products include virtual cards that are used for transactions that require pre-authorization and where no card is presented; and prepaid and gift card products enables secure payment and financial management solutions with single card options, access to open or closed loop redemption, load limits, and with various expirations. This segment markets its products directly to commercial and government organizations. The company’s Health and Employee Benefit Solutions segment provides healthcare payment products and SaaS consumer directed platforms for healthcare payments markets, as well as payroll related benefits to customers in Brazil. Its products include 1Pay and 1Plan payment solution products, as well as ExchangePoint, 1Cloud, and 1Direct SaaS platforms; and employee benefit cards, private label, and processing services for use in the retail, government, and transportation sectors. The company was formerly known as Wright Express Corporation and changed its name to WEX Inc. in October 2012. WEX Inc. was founded in 1983 and is headquartered in South Portland, Maine.

FINANCIAL RATIOS  of  WEX (WEX)

Valuation Ratios
P/E Ratio 72
Price to Sales 4.3
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow -29.1
Price to Free Cash Flow -20.2
Growth Rates
Sales Growth Rate 19.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.8%
Cap. Spend. - 3 Yr. Gr. Rate 11.1%
Financial Strength
Quick Ratio 2
Current Ratio NaN
LT Debt to Equity 141.7%
Total Debt to Equity 147.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.5%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. 11.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 51.7%
Gross Margin - 3 Yr. Avg. 54%
EBITDA Margin 33.9%
EBITDA Margin - 3 Yr. Avg. 40.6%
Operating Margin 19.2%
Oper. Margin - 3 Yr. Avg. 27.8%
Pre-Tax Margin 8.5%
Pre-Tax Margin - 3 Yr. Avg. 22.4%
Net Profit Margin 6%
Net Profit Margin - 3 Yr. Avg. 14.2%
Effective Tax Rate 34.5%
Eff/ Tax Rate - 3 Yr. Avg. 36.3%
Payout Ratio 0%

WEX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WEX stock intrinsic value calculation we used $1018 million for the last fiscal year's total revenue generated by WEX. The default revenue input number comes from 2016 income statement of WEX. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our WEX stock valuation model: a) initial revenue growth rate of 36.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.9%, whose default value for WEX is calculated based on our internal credit rating of WEX, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of WEX.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of WEX stock the variable cost ratio is equal to 73.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for WEX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.8% for WEX.

Corporate tax rate of 27% is the nominal tax rate for WEX. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the WEX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for WEX are equal to 100.3%.

Life of production assets of 17.6 years is the average useful life of capital assets used in WEX operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for WEX is equal to -10.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1497 million for WEX - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 42.995 million for WEX is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of WEX at the current share price and the inputted number of shares is $4.4 billion.


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COMPANY NEWS

▶ WEX Motopass Fuel Card launches new Online Service Centre   [May-17-17 04:45PM  Business Wire]
▶ WEX, Inc. Value Analysis (NYSE:WEX) : April 27, 2017   [Apr-27-17 05:22PM  Capital Cube]
▶ Wex beats Street 1Q forecasts   [07:52AM  Associated Press]
▶ EFS Expands Relationship with Pilot Flying J   [06:50AM  Business Wire]
▶ Knight Transportation Extends Relationship with EFS   [Apr-04-17 07:30AM  Business Wire]
▶ WEX Expands Asian Virtual Payments Solution to Singapore   [Apr-02-17 04:30PM  Business Wire]
▶ WEX Health Strengthens Position as an Industry Leader   [Mar-23-17 04:20PM  Business Wire]
▶ Hedge Funds Arent Crazy About WEX Inc (WEX) Anymore   [Dec-14-16 04:00AM  at Insider Monkey]
▶ David Cooper Joins WEX as Chief Technology Officer   [Dec-13-16 05:00PM  Business Wire]
▶ Hedge Funds Are Buying NCR Corporation (NCR)   [Dec-01-16 09:37AM  at Insider Monkey]
Stock chart of WEX Financial statements of WEX Annual reports of WEX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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