WEX

WEX is a high-margin, cash-generative payments-and-benefits franchise trading at just 15.9x trailing diluted EPS and 2.5x sales, despite a 36.0% operating margin, 16.5% net margin and a 24.6% ROE. FY2025 revenue slipped 1.2% to $1.85B and net income eased 1.8% to $304M, but diluted EPS still grew 12.9% to $8.47 because the company hammered share count down 11.6% via $750M of buybacks (up 15.0% YoY). That is the entire setup: a slow-growth, durably profitable business returning enormous amounts of capital, with the per-share line meaningfully outrunning the absolute P&L.

The scary-looking 10.66x liabilities/equity ratio is mostly a feature of WEX Bank's industrial-bank balance sheet, not corporate leverage. The MD&A confirms the credit-agreement covenant tests a 'consolidated leverage ratio of less than 3.50:1.00' that explicitly excludes up to $400M of permitted securitizations, the non-recourse portion of factoring, and up to $500M of unrestricted cash — i.e. the headline liabilities figure is not what the lenders price. Long-term debt of $3.53B against $664M operating income and $906M cash (up 52% YoY) is workable, and $454M of operating cash flow comfortably covers $141M of capex. Retained earnings rose 14.7% to $2.37B even after the buyback — equity only shrank because management is aggressively retiring stock, which is the right move at this multiple.