WEX - High Quality Corpay Drops Almost 20% And Is Now A Bargain

2024-06-10 23:09:41 ET

Summary

• Corpay's earnings per share are projected to grow at an average rate of 13-15% annually, despite interest rate pressures.
• We consider the stock to be undervalued at 13.6x forward earnings, with potential for re-rating to the 15-20x range.
• CPAY reported inline first quarter results, with slight misses in revenue and a 2% cut to EPS guidance due to interest rates and currency weakness.
• With the stock down 20% since its highs in April, we view the correction as overdone and the buy thesis intact.
• We target a range of $220 to $440 on the shares, implying solid risk-reward at current levels.

We first wrote up Corpay ( CPAY ) in April 2022 for some background on the company. While the stock is only up marginally from our recommendation, earnings per share has jumped from $13.21 in 2021 to a guided figure of $19.00 in 2024 (13% annual growth on average). It would have been much higher had the company not seen interest rate pressures (as management failed to hedge rate exposure)....

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