YB new stock pitches (Mon, Aug 18)

WEX Inc., a high-quality payments processor with three segments (fleet fuel cards, health savings accounts, and corporate payments), trades at just 9.7x 2026E P/E and 8.7x EV/EBITDA despite its capital-light business model with strong free cash flow and high customer retention. The company's embedded services create high switching costs, resulting in long-term client relationships. Activist investor Impactive Capital, which owns 7% of WEX, is pushing for unit sales and streamlined operations, adding accountability to management. WEX recently completed a 10% tender offer in March 2025, signaling management's confidence in the business's intrinsic value, and has committed to avoiding acquisitions while focusing on deleveraging. Key risks include economic sensitivity (particularly in the fleet fuel card segment which is tied to gas prices and fuel volumes), investor disinterest in small/mid-cap payment processors despite the company's improved valuation (P/E compression from 22x in 2018 to 9x 2026E), and the possibility that management might reverse its stance and pursue an acquisition that would undermine the deleveraging narrative.

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Modine Manufacturing Company (MOD) continues to perform strongly under CEO Neil Brinker's leadership, employing the Danaher Business System (DBS) playbook to drive results. Despite providing a wider-than-expected initial guidance range for FY 2026 due to unpredictable macro conditions, the company still projects sustained topline growth leading to mid-teens earnings growth in coming years, supported by steady demand for data center cooling products in its Climate Solutions segment and significant margin improvements in its Performance Technology segment. Four years into Brinker's transformation, MOD is successfully shifting its business mix toward higher-return markets through strategic tuck-in acquisitions in high-growth areas where it can leverage its climate control expertise, while divesting less attractive business units. The approach parallels Roper Technologies' successful strategy of applying lean operations supplemented by 80/20-informed acquisitions. MOD's recently initiated $100M share repurchase program takes advantage of the stock's current ~16x NTM P/E multiple, which appears attractive given the company's long-term growth potential.

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Delivery Hero SE (DHER.DE), a food delivery company primarily operating in emerging Asian markets, trades at 0.7x EV/Sales compared to competitors like Grab or Uber at 3-6x. The company is growing its GMV and revenue, with advertising currently at 2.5% of GMV (targeting 4%), and is expanding its profitable Dmarts (delivery-only supermarkets designed for efficient delivery). A significant risk is that major shareholder Naspers/Prosus (25-30% stake) will be selling its position after receiving clearance to acquire competitor Justeat, potentially creating selling pressure on the stock. The company reduced its debt through the Talabat IPO but still faces risks from price wars in Asia and competition from Grab and Uber. Delivery Hero targets €0.5-1B in free cash flow by 2030 on €18B revenue (3-6% FCF margin) and currently trades at approximately 10x 2027 estimated earnings. With 82% of GMV coming from outside Europe, this is primarily an emerging markets play led by founder-CEO Niklas Östberg.

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