2. O VERVIEW
WU NYSE
WU is a spin-off from
First Data (2006) Recent share price $ 17.89
Market cap 11.06 B
Strong free cash flow
52-week range 14.55 – 22.03
Minimal long term
β(average) 1.10
reinvestment needs
3. B USINESS M ODEL
Leading provider of money movement services
• Consumer-to-Consumer
• Global business payments
• Vast network of third-party agents
4. E CONOMIC M OAT
“Industry growth, market opportunities, and considerable
competitive advantages position Western Union for long-
term success.” -Morningstar
• Economies of Scale
• Brand name
• Network effect of over 445,000 agents
5. M ANAGEMENT
• Executive compensation scaled down
• Undervalued stock repurchases
• Increased dividend
7. R ATIO A NALYSIS
WU MGI GPN
Market cap. 11.1 B 858.8 M 3.6 B
Forward P/E 10.45 16.65 12.75
PEG 0.95 3.01 1.15
P/S 2.01 0.69 1.80
Total cash 2.7 B 520.4 M 723.9 M
Total debt 3.9 B 839.2 M 690.74 M
D/E (mv) 36.0 % 97.7 % 19.4 %
Current ratio 2.42 43.33 1.54
Beta 1.10 1.02 0.91
Short Ratio 2.30 6.50 0.90
Payout Ratio 20.0 % N/A 3.0 %
C-C = 84% of rev ; Business payments=14% of rev ; 2% Other ; Transaction fees=78% of rev ; For. Exch. rev = 20% (Custom House acquisition)
Fwd. annual div yld is only 1.8%
* Means that there was not sufficient 5 year data to calculate an average GPN= Global Payments Inc. MGI= Moneygram International
My valuation model was based on a stock price of $17.89. I used a conservative PE target of 13, a beta of 1.1, dividends, earnings, and book value growth of 8%, 8%, and 10%, respectively. I also used a dividend of $0.32 and current EPS of 1.70. The resulting target price is an average of the most reasonable models’ target prices.
