The Western Union Company (NYSE:WU) isn’t the biggest company in the market, but it has seen some major price moves in recent months on the NYSE, hitting highs of US$17.21 and falling to lows of US$13.44. 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$13.91 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.
What is the Western Union Opportunity?
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 6.04x to be below its average of 27.85x, indicating that the stock is trading at a lower price than the IT industry. Western Union’s stock price also appears relatively stable compared to the rest of the market, as indicated by its low beta. If you think the stock price should eventually reach its industry peers, a low beta might suggest it’s unlikely to do so anytime soon, and once it does, it may be difficult to fall back into an attractive buy range.
Can we expect growth from Western Union?
Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. 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. Although in the case of Western Union, it is expected to post very negative earnings growth over the next few years, which does not help bolster its investment thesis. It seems that the risk of future uncertainty is high, at least in the short term.
What this means for you
Are you a shareholder? Although WU is currently trading below the industry PE ratio, the negative earnings outlook brings some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio’s exposure to WU, or whether diversifying into another security may 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 doing some more in-depth research on 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. For example, Western Union has 2 warning signs (and 1 that doesn’t sit well with us) we think you should know.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.