Today we're going to take a closer look at mid-cap Consumer Discretionary company Western Union Company, whose shares are currently trading at $11.6. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Western Union Company Is Fairly Priced to Earnings but Overpriced Compared to Its Book Value:
The Western Union Company provides money movement and payment services worldwide. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, Western Union Company has a trailing 12 month P/E ratio of 5.9 and a P/B ratio of 6.93.
Western Union Company's PEG ratio is 6.94, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $5,590 | $5,292 | $4,835 | $5,071 | $4,476 | $4,397 |
| Revenue Growth | n/a | -5.33% | -8.64% | 4.88% | -11.74% | -1.76% |
| Operating Margins | 20% | 25% | 20% | 22% | 23% | 19% |
| Net Margins | 15% | 20% | 15% | 16% | 20% | 17% |
| Net Income (MM) | $852 | $1,058 | $744 | $806 | $911 | $748 |
| Net Interest Expense (MM) | $150 | $387 | $118 | $106 | $124 | $105 |
| Depreciation & Amort. (MM) | $188 | $258 | $226 | $159 | $141 | $144 |
| Earnings Per Share | $1.87 | $2.46 | $1.79 | $1.97 | $2.34 | $1.98 |
| EPS Growth | n/a | 31.55% | -27.24% | 10.06% | 18.78% | -15.38% |
| Diluted Shares (MM) | 454 | 431 | 415 | 409 | 388 | 345 |
| Free Cash Flow (MM) | $685 | $787 | $721 | $1,008 | $550 | $551 |
| Capital Expenditures (MM) | $137 | $128 | $157 | $38 | $32 | $27 |
| Current Ratio | 0.42 | 0.73 | 0.76 | 0.13 | 0.16 | 0.15 |
| Long Term Debt (MM) | $9,130 | $8,632 | $8,865 | $8,277 | $7,920 | $7,295 |
| Net Debt / EBITDA | 5.78 | 4.31 | 5.64 | 4.81 | 5.11 | 5.87 |
Western Union Company has declining revenues and decreasing reinvestment in the business, EPS growth achieved by reducing the number of outstanding shares, and a highly leveraged balance sheet. On the other hand, the company has decent operating margins with a stable trend working in its favor. Furthermore, Western Union Company has irregular cash flows.
