Watch Out: Barbarians At The Gate For Western Union (WU)
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.
Trade-Ideas LLC identified
(
) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Western Union as such a stock due to the following factors:
- WU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $145.1 million.
- WU has traded 5.0 million shares today.
- WU traded in a range 251.2% of the normal price range with a price range of $0.80.
- WU traded above its daily resistance level (quality: 20 days, meaning that the stock is crossing a resistance level set by the last 20 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).
Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.
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More details on WU:
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. The stock currently has a dividend yield of 3.2%. WU has a PE ratio of 12.1. Currently there are 3 analysts that rate Western Union a buy, 5 analysts rate it a sell, and 10 rate it a hold.
The average volume for Western Union has been 5.9 million shares per day over the past 30 days. Western Union has a market cap of $10.0 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.69 and a short float of 16.4% with 10.82 days to cover. Shares are up 7.2% year-to-date as of the close of trading on Friday.
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Analysis:
rates Western Union as a
. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
Highlights from the ratings report include:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
- WESTERN UNION CO has improved earnings per share by 35.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, WESTERN UNION CO increased its bottom line by earning $1.59 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $1.59).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the IT Services industry average. The net income increased by 27.7% when compared to the same quarter one year prior, rising from $173.40 million to $221.50 million.
- 46.75% is the gross profit margin for WESTERN UNION CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.71% trails the industry average.
- You can view the full Western Union Ratings Report.
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