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Western Union Company Stock Buy Recommendation Reiterated (WU)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Western Union Company (NYSE:WU) has been reiterated by TheStreet Ratings as a buy with a ratings score of B. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • Net operating cash flow has increased to $237.30 million or 10.37% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -4.64%.
  • 47.50% is the gross profit margin for WESTERN UNION CO which we consider to be strong. Regardless of WU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WU's net profit margin of 15.99% compares favorably to the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.0%. Since the same quarter one year prior, revenues slightly dropped by 4.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • In its most recent trading session, WU has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the IT Services industry and the overall market, WESTERN UNION CO's return on equity significantly exceeds that of both the industry average and the S&P 500.

The Western Union 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. Western Union has a market cap of $9.2 billion and is part of the financial sector and financial services industry. The company has a P/E ratio of 10.00, below the S&P 500 P/E ratio of 18.00. Shares are up 24.1% year to date as of the close of trading on Thursday.

You can view the full Western Union Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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