Why Moneygram International (MGI) Stock Is Tumbling Today

NEW YORK (TheStreet) -- Moneygram International (MGI) stock is plummeting on Thursday after retail giant Walmart (WMT) announced exclusive money transfer service Walmart-2-Walmart. The world's largest retailer said the service, similar to Moneygram's, will bring lower fees and simplicity to the money transfer market.

"After listening to our customers complain about the high fees and confusion associated with transferring money, we knew there had to be a solution," said Walmart U.S. VP of services Daniel Eckert.

From April 24, Walmart will roll out the service to more than 4,000 stores nationwide offering transfers with fees up to 50% less than similar offerings.

By midafternoon, shares of Moneygram had taken off 16.6% to $15.01. Trading volume of 2.3 million was more than six times its three-month daily average.

Competitors Western Union (WU) and Xoom (XOOM) have also slipped on the announcement.

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TheStreet Ratings team rates MONEYGRAM INTERNATIONAL INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate MONEYGRAM INTERNATIONAL INC (MGI) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 20.1%. Since the same quarter one year prior, revenues slightly increased by 8.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MONEYGRAM INTERNATIONAL INC has improved earnings per share by 17.9% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MONEYGRAM INTERNATIONAL INC turned its bottom line around by earning $0.73 versus -$0.70 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $0.73).
  • The gross profit margin for MONEYGRAM INTERNATIONAL INC is rather high; currently it is at 61.02%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MGI's net profit margin of 6.06% significantly trails the industry average.
  • In its most recent trading session, MGI 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
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