Western Union (WU): Assessing Valuation Following Analyst Downgrade and Softer Earnings Outlook

Is Western Union (WU) Still Worth Watching After Analyst Downgrade?

Western Union (WU) is back in the spotlight after its latest trading session saw shares slip 3.43%, lagging the S&P 500. The trigger? Market analysts now expect the company's upcoming results to show lower earnings and revenue compared to last year, and a recent analyst rating cut leaves many investors wondering if headwinds are picking up. When sentiment like this shifts, it can lead to a rethinking of what the stock is really worth going forward.

The drop follows what has already been a tough stretch for Western Union. Over the past year, the stock is down nearly 28%, underperforming peers and losing momentum in the process. This slide builds on ongoing concerns from the past month and three-year period, where returns have also stayed in the red. The change in outlook comes just as the company is trying to manage slowing revenue growth and a significant decline in net income over the last year.

So, with sentiment turning negative and shares retreating, does the current price reflect all the risks ahead or could this be a chance to buy if the market is being too pessimistic about Western Union’s future?

Most Popular Narrative: 14.7% Undervalued

According to the most widely followed narrative, Western Union appears undervalued by nearly 15% compared to its fair value derived from anticipated future earnings and risk profile.

The ongoing digital transformation, including expanded digital wallet offerings, card-based retail transactions, and value-added services, positions the company to capture a growing share of the large, underpenetrated market of financially included and mobile-first consumers. This supports improved revenue growth and higher long-term net margins due to better cost efficiency. Rising global migration flows and continued urbanization underpin resilient long-term demand for cross-border remittances, strengthening Western Union's top-line prospects despite near-term headwinds in specific corridors or geographies.

Curious about what sets this valuation apart? The entire case is built on a foundation of bullish digital catalysts and careful future assumptions, but one surprising financial projection holds the key. Is Western Union’s transformation story strong enough to deliver long-term margin gains and beat the consensus target? The underlying calculations may reshape what investors think they know about fair value.

Result: Fair Value of $9.32 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, intensifying regulatory scrutiny and digital competitors could threaten Western Union’s growth story. This could make margin recovery much harder than bulls expect.

Find out about the key risks to this Western Union narrative.

Another View: Discounted Cash Flow Signals Deeper Value

Our SWS DCF model takes a different approach by weighing all of Western Union’s cash flow potential. Intriguingly, it finds the stock is trading far below its calculated fair value. Could the market be missing something big?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Western Union for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Western Union Narrative

If you see the story differently or want a hands-on look at the numbers behind the scenes, you can easily craft your own narrative in just minutes. Do it your way

A great starting point for your Western Union research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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