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We came across a bullish thesis on The Western Union Company (WU) on Substack by Bulls On Parade. In this article, we will summarize the bulls’ thesis on WU. The Western Union Company (WU)'s share was trading at $10.51 as of Feb 14th. WU’s trailing and forward P/E were 3.84 and 5.83 respectively according to Yahoo Finance.
A close-up of hands counting bills, depicting the payment services the company offers.
Western Union (WU), headquartered in Denver, CO, is a well-established player in the global payments industry, offering services in money transfers and payment solutions. Despite recent challenges, the company remains poised for growth, particularly with its Branded Digital business, which has shown resilience. Strong performance in regions such as Latin America, the Caribbean, and North America is contributing to growth in its Consumer Money Transfer segment. The company has also consistently offered an attractive dividend yield, currently at 9.17%, significantly higher than the industry average of 0.7%. In 2024, Western Union returned approximately $318 million to shareholders through dividends and repurchased shares worth $352 million.
Although Western Union's share price has been under pressure over the last five years, now sitting at its lowest level in nearly 20 years, it presents a compelling margin of safety for investors. The market has largely discounted the company due to the perception that newer players are disrupting its traditional money transfer business. While some of this is true, Western Union’s ongoing digital transition under its relatively new CEO, Devin McGranahan, is likely to counterbalance the decline in its core business. The company’s EVOLVE 2025 strategy is focused on expanding its digital money transfer service, which should help it better adapt to the changing dynamics in the market.
The company’s efforts to grow its Consumer Services segment, targeting double-digit growth, align with its goals of increasing profitability, given the segment’s attractive margin profile. Western Union’s partnerships with fintechs and financial institutions, such as Katapulk Marketplace, Visa, and Tencent, are enhancing its service offerings and should help sustain transaction volumes. Innovations like Send Now, Pay Later, which integrate lending and remittance, are expected to aid the company in penetrating new and existing markets. With an extensive global network spanning more than 200 countries, Western Union is well-positioned to capitalize on its market presence.
Financially, the company has been able to maintain strong cash generation and adequate reserves, with $1.1 billion in cash as of September 30, 2024. It has also repurchased shares consistently over the past few years, totaling $400 million in 2022, $351.8 million in 2023, and $352 million in 2024. Western Union’s solid financial position supports uninterrupted share buybacks and dividend payments, contributing to its stability.