MoneyGram (MGI) Announces Moves to Enhance Capital Position
MoneyGram International, Inc.’s MGI board of directors recently authorized a share buyback program in a bid to return more value to shareholders. The latest program will enable the company to buy back shares of up to $50 million, reflecting the company’s strong financial position and adequate cash generation abilities.
Concurrently, the company declared to pursue another initiative, which includes principal repayment of a $15 million voluntary term loan.
The twin moves highlight MoneyGram’s sincere efforts to upgrade the capital structure and reduce the high debt burden, which has been troubling the company for quite some time.
Repaying debts have successfully reduced the company’s interest expense. Likely to be at the lowest level now than it had been in years, interest expense tumbled 20.2% in the first nine months of 2021 from the prior-year comparable period. If interest expenses continue on a downward spiral, the company’s margin expansion will be somewhat aided in the days ahead.
MoneyGram has been undertaking several initiatives to reduce its interest burden. In July 2021, the company announced the private offering of senior secured notes with an aggregate principal amount of $415 million and set to mature in 2026. The company has been showing prudence by issuing senior notes for procuring funds by capitalizing on the low interest rate environment induced by the COVID-19 pandemic.
One month prior to that, the company utilized proceeds worth $97.6 million raised from an “at-the-market" equity offering program and cash in hand for repaying debts worth $100 million.
MoneyGram also puts its cash flow from operations to use in servicing debt obligations, which acts as a drag on its cash generation abilities. The company has been focused on servicing its debt, else creditworthiness would be hampered.
A robust financial position driven by a strong balance sheet and adequate cash generation capabilities over the years has paved the way for MoneyGram to undertake business investments for pursuing growth-related initiatives.
Besides, a strong digital arm places MoneyGram well for growth. The digital platform of the company has been built on the back of extensive investments and several alliances with well-established financial institutions. It remains optimistic that the digital business will account for 50% of all transactions in 2024.
Zacks Rank & Price Performance
Shares of MoneyGram, which carries a Zacks Rank #2 (Buy), have gained 7.5% year to date compared with the industry’s rally of 23.7%.
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Other Stocks to Consider
Some other top-ranked stocks in the same space include Jefferies Financial Group Inc. JEF, Houlihan Lokey, Inc. HLI and Intercorp Financial Services Inc. IFS. While Jefferies Financial and Houlihan Lokey sport a Zacks Rank #1 (Strong Buy), Intercorp Financial Services carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Jefferies Financial, Houlihan Lokey and Intercorp Financial Services have a trailing four-quarter earnings surprise of 222.85%, 39.53% and 108.27%, on average, respectively.
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