|Written by GSCR Staff|
|Tuesday, 10 February 2015 08:00|
In Monday’s Goldman Guide we talked about how America needs cash.
Tax season is here and everyone is looking to get a nice refund or minimize what they owe. Cash is truly king.
A company that has been around since before the Civil War that deals with money that used to be a household name could be a nice play this season. I am talking about Western Union Company (NYSE – WU - $17.62) of course; a storied past with some very relevant ‘cash’ products and services for today’s economy. The Company provides money movement and payment services worldwide. The Company operates in three segments: Consumer-to-Consumer, Consumer-to-Business, and Business Solutions. The Consumer-to-Consumer segment offers cash money transfer services involving walk-in agent locations. The Consumer-to-Business segment offers options to make one-time or recurring payments from consumers to businesses and other organizations, including utilities, auto finance companies, mortgage servicers, financial service providers, government agencies, and other businesses. The Business Solutions segment facilitates payment and foreign exchange solutions, principally cross-border and cross-currency transactions for small and medium size enterprises and other organizations, as well as for individuals. As of December 31, 2013, the Company had a network of approximately 500,000 agent locations in approximately 200 countries and territories.
While WU may be slightly out of our market cap range at nearly $9 billion, the price is definitely right in the sweet spot. Technical analysis indicates a very bullish signal related to short and intermediate EMA for the traders out there. A dividend yield of 2.8% is also attractive along with a 5-year PEG ratio of just 1.2. A profit margin of 14% and operating margin of 20% are both improved highs over three straight quarters.
Western Union has several business partnerships with checks cashed companies like Always PayDay for instance. In case you missed it last week, the labor participation rate finally appears to be improving. As people re-enter the workforce without regular bank accounts, services like this could reap benefits.
We think WU is a great way to get some cash this year. The stock should climb to over $20 over the next six months.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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