WageWorks (WAGE) priced on May 10, 2012 at $9 which was just below the filed range of $10-12.  Since then however the shares have been under accumulation and are now changing hands at $15.

WAGE is an example of the type of solid IPO that slips between the cracks of the IPO system. The deal was brought by a decidedly second tier underwriting group (William Blair, Stifel Nicolaus, JMP and Needham) and “consumer directed benefit plans” don’t have the sizzle that comes from the latest cloud-based social consumer internet application companies.

The value proposition for WAGE is fairly simple: implementing consumer-defined benefit programs (typically for healthcare and transportation) allows companies to reduce their payroll taxes and employees to lower their income tax. And WAGE provides the software and service platform to get it done.

It’s an enterprise client base with plenty of additional market opportunity remaining. Management comes from the types of places you’d expect – First Data, Western Union, Alliance Data Systems, and American Express. This is a combination of technology, benefits administration and financial services.

Revenue growth in the mid-20% range is above the target model of 15-20% and mid-teens operating margins are within reach. They have yet to report their first quarter as a public company and we still need to get through the 180-day lockup.

The underwriters introduced research coverage in early June which helped the stock move from the $11 range to their average price target of $15. We haven’t completed our IV model on this one yet but it would appear to deserve something higher, probably $20 for 2012.

IPO Candy members who missed the original roadshow can access it here: WageWorks (WAGE) IPO Roadshow May 2012

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