Moneygram International Inc (MGI): There’s Upside Potential for This Money Transfer Business

The physical location money transfer business is getting more and more competition from online money transfer. One of the new emerging players is Xoom Corp (NASDAQ:XOOM), which has operations in around 30 countries. Because Xoom conducts most of its business online, it was easier for the company to scale up its business than it was for its competitors. Consequently, Xoom has been growing very fast. In the first quarter of 2013, Xoom grew its revenue by 43%, to $24.3 million while its GAAP net loss has been narrowed down, from $494,000 last year to $79,000 this year. For the full year, Xoom expected to generate around $104 million to $106 million in revenue. The net loss might stay in the range of $0.37 to $0.32. As Xoom generated negative TTM EBITDA, its EBITDA multiple is not valid. Xoom seems to be valued quite high on the market at as high as 8.22 times its sales.

My Foolish take

Income investors might like Western Union the most as it is the only dividend-paying company among the three, with a nice dividend yield at 2.9%. With its huge location network with wide coverage, I personally think Western Union should be worth much more than MoneyGram. Both of them are trading at more than 7 times its trailing EBITDA. If MoneyGram got acquired, its share price will jump higher. Consequently, Western Union’s share price will also move higher because of MoneyGram’s acquisition.

The article There’s Upside Potential for This Money Transfer Business originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.