Wright Express CorporationWXS

Morningstar Rating

Stock Research and Analysis

by Michael Kon, CFA

Wright Express boasts what we think is one of the best business models around--a closed-loop card network--but because its long-term fortunes are tied to the inherent volatility of gasoline prices, our enthusiasm is tempered.

Wright provides fleet-management Read more

Bulls Say

Wright's charge cards are accepted at more than 90% of U.S. service stations and a growing number of vehicle-maintenance locations, giving Wright one of the industry's largest networks.

The firm's closed-loop network is a huge plus because it handles every aspect of payment transactions made with Wright cards, enabling it to collect a tremendous amount of data useful to its customers.

Wright's costs are largely fixed. Thus, as the firm's revenue increases, its profits should increase even faster.

Wright's focus on smaller fleets should insulate it somewhat from the price competition that dominates the larger segments of the fleet fuel card market. Plus, customer loyalty has proved to be pretty strong, with the firm experiencing only about 3% voluntary attrition annually.

Through its bank subsidiary, the firm offers a MasterCard charge card to enable its customers to buy things outside its own network. Wright Express earns a small percentage of the total dollars charged on these MasterCards, and volume has been growing very rapidly. Read more

Bears Say

Most of the firm's revenue is tied to gas prices, which can fluctuate wildly. Despite the firm's hedging programs, a steep drop in fuel prices would eventually drag down sales and squeeze margins.

Wright uses derivatives to hedge its exposure to both fuel prices and interest rates. Fluctuations in the value of those derivatives hit the firm's income statement and make quarterly earnings very volatile.

The market for large fleet customers is highly competitive. For example, when the firm announced that it had extended an agreement with ExxonMobil XOM for another 10 years to use Wright's fleet card services, it admitted that it sacrificed some margin to win the business. Read more

Strategy

Wright is pursuing several avenues for growth. The firm is targeting the underserved small-fleet market, which it defines as businesses with fewer than 25 vehicles. Wright is also chipping away at the Read more

Management

Michael Dubyak has been Wright's president and CEO since 1998. He joined the firm in 1986 and worked his way up through the sales and marketing ranks. We think the firm's stewardship practices leave a lot to be desired. We'd prefer to see directors Read more

Profile

Wright Express, which was spun off from Cendant in 2005, provides fuel- and fleet-management services. Wright's proprietary charge card enables customers to purchase fuel Read more

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