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Is Western Union (WU) Stock Undervalued Right Now?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Western Union (WU) is a stock many investors are watching right now. WU is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 13.67. This compares to its industry's average Forward P/E of 26.55. Over the past year, WU's Forward P/E has been as high as 14.52 and as low as 8.53, with a median of 10.61.

Investors should also note that WU holds a PEG ratio of 1.11. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WU's PEG compares to its industry's average PEG of 1.79. Within the past year, WU's PEG has been as high as 3.27 and as low as 1.10, with a median of 2.22.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. WU has a P/S ratio of 2.09. This compares to its industry's average P/S of 4.77.

Finally, investors should note that WU has a P/CF ratio of 8.22. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 24.52. Within the past 12 months, WU's P/CF has been as high as 34.31 and as low as 5.87, with a median of 7.32.

Value investors will likely look at more than just these metrics, but the above data helps show that Western Union is likely undervalued currently. And when considering the strength of its earnings outlook, WU sticks out at as one of the market's strongest value stocks.

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