Although The Western Union Company (NYSE:WU) may not be the best-known stock right now, it has received a lot of attention due to a substantial price movement on the NYSE during months, hitting $19.82 at one point, and falling as low as $15.47. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. One question to answer is does Western Union’s current price of US$16.55 reflect the true value of mid cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at Western Union’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Western Union
What is the opportunity at Western Union?
Good news, investors! Western Union is still a good deal right now according to my multiple price model, which compares the company’s price-to-earnings ratio to the industry average. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find Western Union’s ratio of 6.96x to be below its average of 29.43x, indicating that the stock is trading at a lower price than the IT industry. What’s more interesting is that Western Union’s stock price is quite stable, which can mean two things: first, it can take a while for the stock price to approach its industry peers, and second, there may be less chance of buying low in the future once it reaches that value. This is because the stock is less volatile than the broader market given its low beta.
What type of growth will Western Union generate?
Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Buying a big company with solid prospects at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with negative earnings growth of -19% expected over the next two years, near-term growth certainly does not appear to be a driver for a buy decision for Western Union. This certainty tilts the risk-reward scale toward higher risk.
What does this mean to you :
Are you a shareholder? Although WU is currently trading below the industry PE ratio, the unfavorable outlook of negative growth carries a degree of risk. I recommend you think about whether you want to increase your portfolio’s exposure to WU, or whether diversifying into another stock might be a better decision for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on WU for a while but are hesitant to take the plunge, I recommend digging deeper into the stock. Given its current price multiple, now is the perfect time to make a decision. But keep in mind the risks that come with a negative growth outlook going forward.
Keep in mind that when it comes to analyzing a stock, it is worth noting the risks involved. Example: we have identified 2 warning signs for Western Union you need to be aware and 1 of them is important.
If you are no longer interested in Western Union, you can use our free platform to view our list of over 50 other stocks with high growth potential.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.