WageWorks (WAGE) is working on a new base

WageWorks (NYSE:WAGE), which manages employee benefits programs, is working on a new base amid accelerating sales and profit growth.

The stock has risen more than sixfold from its May 2012 debut at 9 a share. It's now working on a less risky first-stage base after resetting its base count amid a sharp correction in the first half of last year.

San Mateo, Calif.-based WageWorks is benefiting from a growing shift to flexible spending accounts and health savings accounts, which give employees a tax break for contributions. The accounts are portable, which means they can be taken from one employer to another.

WageWorks' best-possible 99 Composite Rating puts it among the leaders of the 24-stock Commercial Services-Outsourcing industry group, which was ranked No. 11 out of 197 as of Monday's IBD. Trinet Group (NYSE:TNET), which provides human resources services, is another industry leader.

Profit has picked up for two straight quarters, from a 20% increase in the second quarter of last year to subsequent gains of 33% and 35%. Sales growth has also accelerated over that span, rising 8%, 27% and 43%.

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Revenue for the period was driven by increases in health care administration fees and commuter benefits plans, which give tax incentives to employees who use public transportation or other environmentally friendly ways of getting to work.

Fund ownership of the stock has slipped in recent quarters, from 335 in the first quarter of 2014 to 324 as of Q4. However, the A+-rated T Rowe Price New Horizons Fund boosted its stake in the latest quarter.
The stock is shaping a base-on-base pattern after a failed breakout over a 62.34 buy point of a cup-with-handle base.


It's pulled back to its 10-week moving average in light volume, which is a good sign. However, its relative strength line is fading, indicating that the stock is underperforming the S&P 500.

For this year, analysts expect WageWorks to post a 22% gain in profit to $1.16 a share, followed by another 22% increase in 2016.

Annual pretax margin has picked up for three straight years, to a robust 21.2% last year.

Disappointing May for IPOs : only 10 companies went public

With no initial public offerings firmly scheduled for this week, it should be the second-lowest month so far this year based on the number of deals that were priced, after January's paltry three. In May 2011, 18 companies went public.

The month's bright spot was the amount of money raised: $18.52 billion, thanks to the $16 billion-plus from the Facebook deal. The month's total is the highest dollar amount since November 2010, when $21 billion was raised, thanks to a megadeal from General Motors Co., according to Ipreo.

Six of May's debuts were priced below their expected ranges. Although all but one—propylene producer PetroLogistics LP(PDH) —notched first-day gains, the majority were minor. Only two, benefits administrator WageWorks Inc. (WAGE) and Ignite Restaurant Group Inc., closed up more than 15%. Six rose less than 10%, the minimum deemed a suitable first-day "pop."

More than half of the 15 most-recent IPOs were below their offering prices through Friday, compared with only four of the top 15 last month at this time, according to Ipreo, a market-intelligence firm. That includes the two largest deals in May by dollars raised: private-equity firm Carlyle Group LP (CG) and Facebook, which were down 2.2% and 16%, respectively, from their IPO prices. It is hard to say how Facebook's performance will affect the IPO market beyond likely damping enthusiasm for social-media deals in the near term. The week before the Memorial Day weekend and the two weeks that follow tend to be slow for IPOs in the U.S., and the broader stock market has trended down this month, making it harder to interest investors in new public companies.

Two IPOs were postponed last week, citing market conditions, but they were small offerings without much sizzle to their stories.

Looking ahead, one company plans to start its investor meetings, or "roadshow" on Tuesday, according to Brad Hammond, president of NetRoadshow Inc., an Atlanta company that operates websites on which prospective IPOs hold online investor presentations and which is open to retail investors. But even he won't know which company that is until Tuesday; it registers using a code name.

WageWorks prices its IPO

WageWorks Inc., the provider of human-resources services for 37 Fortune 100 members including Ford Motor Co. and Morgan Stanley, is planning an initial public offering this week that will value the company at more than five times its peers.

• The price range of WageWorks's offering was lowered to $8 to $9 on Thursday from a previous goal of $12 to $14, a clear sign that investors weren't lining up for this deal at the original valuation. The company slashed the offering price for its shares by more than a third.
• Later that same day (Aug 4) WageWorks Inc. postponed its initial public offering after U.S. stocks posted their biggest daily decline in more than two years.

The company, which provides private, membership-based medical services at members' workplaces or homes, is considered an add-on benefit targeted at self-insured employers and individuals. Its customers pay a monthly or annual fee, and individuals pay $35 per visit, in exchange for convenient access to basic primary care or certain chronic care issues.

IPO details:
WageWorks, Inc. (filed 25-Apr-11)
Based in San Mateo, CA
Primary Industry: Outsourced Human Resources Services
2010 Sales: $115.0 mil
2010 Employees: 844
Proposed Ticker: WAGE
Offering Amount: $75.0 mil
Lead Underwriter: Credit Suisse Securities (USA) LLC

The San Mateo, California-based company is offering 5.77 million shares for $12 to $14 each to raise about $81 million, according to a filing with the U.S. Securities and Exchange Commission. The midpoint of the IPO range values WageWorks at about 2.8 times last year's sales. That's more than the average of about 0.5 times sales among 17 U.S.-listed human-resources services companies with a market value of less than $1 billion, data compiled by Bloomberg show.

WageWorks, whose services allow a company's employees to set aside pretax wages to pay for health-care and commuting expenses, may struggle to obtain the valuation it's seeking after the Standard & Poor's 500 Index declined seven out of the past eight trading days. The company also faces new U.S. health- care laws that limit the use of flexible spending and health savings accounts, two of WageWorks' services.


WageWorks, which says it competes with U.S. health insurer Aetna Inc. and Automatic Data Processing Inc., would be valued at about $325 million at the midpoint of its price range.

Sales at WageWorks rose 20 percent in the six months through June to $69.2 million from a year earlier, primarily because of takeovers, the company said in its filing. Full-year sales in 2010 were $115 million, 6 percent higher than the previous year.

Growth Strategy

WageWorks' growth strategy includes buying smaller operators, and the company has made four acquisitions since 2007 to add clients and services, according to its filing. Purchases have included Creative Benefits in September 2008 and Fringe Benefits Management Co. in November.

Customers access WageWorks benefit programs through Web- based software, which allows the company to enhance its products quickly, it said in its filing. This "on-demand" business model also requires less up-front investment by customers compared with services that require on-site software installation, it said.

IPO Proceeds

The company initially filed in April, joining a flood of companies to announce plans for IPOs in the second quarter of this year. WageWorks General Counsel Kimberly Jackson declined to comment, citing the pre-IPO quiet period.

Proceeds from the offering will be used for working capital and general corporate purposes, the filing showed.

Owners of WageWorks include VantagePoint Capital Partners, Advent International Corp. and Camden Partners. All of the shares in the offering are being sold by WageWorks.

Credit Suisse Group AG and William Blair & Co. are leading the offering, according to the filing. The shares are scheduled to begin trading tomorrow on the New York Stock Exchange under the symbol WAGE.

IPOs this week (1 Aug 2011) : 4 companies scheduled

* Please read the note below:

Company	Symbol	Offer Date	Scale	Shares
American Capital Mortgage	MTGE	08/01/2011	$350	17.5
WageWorks, Inc.	WAGE	08/01/2011	$74.99999	5.76923
WhiteGlove Health	WGH	08/01/2011	$27.5	2.5
Midland States Bancorp, Inc.	MSBI	08/01/2011	$80	5

• WhiteGlove delayed IPO for second time, now expects to price next week. It was originally scheduled to price last week, then this week, and has now been moved into next week.  The company, which provides private, membership-based medical services at members' workplaces or homes, is considered an add-on benefit targeted at self-insured employers and individuals. Its customers pay a monthly or annual fee, and individuals pay $35 per visit, in exchange for convenient access to basic primary care or certain chronic care issues.  The service, which relies on nurse practitioners to deliver care and doesn't cover specialists and diagnostics like ultrasound, takes care of illnesses like colds or earaches, as well as management of conditions like diabetes.  WhiteGlove claims that its services cut back on urgent care clinic and emergency room visits and cut absenteeism for workers.  The company has never been profitable and warns that it expects to continue to post significant operating losses as it expands from its current base of markets, five of which are in Texas.
• 8/4 : WageWorks Inc., the provider of human-resources services for companies including Ford Motor Co., also postponed its initial public offering after U.S. stocks posted their biggest daily decline in more than two years.