We came across a bullish thesis on The Western Union Company (WU) on Substack by Bulls On Parade. In this article, we will summarize the bulls’ thesis on WU. The Western Union Company (WU)’s share was trading at $10.51 as of Feb 14th. WU’s trailing and forward P/E were 3.84 and 5.83 respectively according to Yahoo Finance.
A close-up of hands counting bills, depicting the payment services the company offers.
Western Union (WU), headquartered in Denver, CO, is a well-established player in the global payments industry, offering services in money transfers and payment solutions. Despite recent challenges, the company remains poised for growth, particularly with its Branded Digital business, which has shown resilience. Strong performance in regions such as Latin America, the Caribbean, and North America is contributing to growth in its Consumer Money Transfer segment. The company has also consistently offered an attractive dividend yield, currently at 9.17%, significantly higher than the industry average of 0.7%. In 2024, Western Union returned approximately $318 million to shareholders through dividends and repurchased shares worth $352 million.
Although Western Union’s share price has been under pressure over the last five years, now sitting at its lowest level in nearly 20 years, it presents a compelling margin of safety for investors. The market has largely discounted the company due to the perception that newer players are disrupting its traditional money transfer business. While some of this is true, Western Union’s ongoing digital transition under its relatively new CEO, Devin McGranahan, is likely to counterbalance the decline in its core business. The company’s EVOLVE 2025 strategy is focused on expanding its digital money transfer service, which should help it better adapt to the changing dynamics in the market.
The company’s efforts to grow its Consumer Services segment, targeting double-digit growth, align with its goals of increasing profitability, given the segment’s attractive margin profile. Western Union’s partnerships with fintechs and financial institutions, such as Katapulk Marketplace, Visa, and Tencent, are enhancing its service offerings and should help sustain transaction volumes. Innovations like Send Now, Pay Later, which integrate lending and remittance, are expected to aid the company in penetrating new and existing markets. With an extensive global network spanning more than 200 countries, Western Union is well-positioned to capitalize on its market presence.
Financially, the company has been able to maintain strong cash generation and adequate reserves, with $1.1 billion in cash as of September 30, 2024. It has also repurchased shares consistently over the past few years, totaling $400 million in 2022, $351.8 million in 2023, and $352 million in 2024. Western Union’s solid financial position supports uninterrupted share buybacks and dividend payments, contributing to its stability.
Currently trading at a price-to-equity (P/E) ratio of 5.2, which is well below the industry average of 33, Western Union appears undervalued relative to its peers. This discrepancy presents a potential opportunity, as the company’s consumer base remains large, and profitability in growth segments like consumer services is increasing. Despite its relatively slow growth compared to higher-flying tech stocks, Western Union’s stability and high dividend yield make it an attractive investment for those seeking income and long-term value. The company’s intrinsic value is estimated to be around $19 per share, suggesting significant upside potential from its current price. With strong fundamentals, a reliable dividend, and growth prospects through its digital transition, Western Union represents an appealing, lower-risk investment option for 2025.
The Western Union Company (WU) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held WU at the end of the third quarter which was 32 in the previous quarter. While we acknowledge the risk and potential of WU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.