The Western Union Company (NYSE:WU) may not be a large-cap stock, but it has seen significant price moves over the past several months on the NYSE, hitting highs of US$19.82 and falling to lows of US$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$16.81 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 Western Union worth?
Good news for investors – Western Union is still trading at a fairly cheap price according to my multiple price model, where I compare the company’s price-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 7.07x to be below its average of 29.17x, indicating that the stock is trading at a lower price than the IT industry. Another thing to keep in mind is that Western Union’s stock price is quite stable compared to the rest of the market, as indicated by its low beta. This means that if you think the current stock price should move closer to its industry peers, a low beta could suggest that it is unlikely to reach that level anytime soon, and once there will be, it can be difficult to fall back into an attractive purchase. worn again.
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. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. However, with negative earnings growth of -20% 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 negative earnings outlook brings some uncertainty, which equates to higher 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 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.
So while the quality of earnings is important, it is equally important to consider the risks Western Union faces at this stage. Our analysis shows 2 warning signs for Western Union (1 is a little nasty!) and we strongly recommend that you consult them before investing.
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.