Is Western Union Looking For Love in All the Wrong Places?

With shares of The Western Union Company (NYSE:WU) trading at around $14.15, is WU an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Western Union just took a big hit in Mexico, but that should have come as no surprise as Mexico is more like a war zone than a normal functioning economy at the moment. It’s estimated that drug cartels have infiltrated 78 percent of businesses for a cut. Even if a business in Mexico isn’t a victim, the threat is always there. It might seem as though Western Union is even a bit masochistic, considering it has now taken an increased interest in Europe.

Western Union is opening new offices in Vienna and Frankfurt in an effort to target SMEs – Small and Medium Enterprises. The reason for this move is that there are over 2 million SMEs in Germany and Austria. If Western Union can even make a dent on this market by offering more convenience for payment transactions, then the potential is good. However, Europe is extremely weak at the moment. Demand in every business is poor, and people as well as businesses are hoarding their money. If there is any way to work around adding an extra expense, it will be found, at least in most cases.

Western Union appears to know what it’s doing, as revenue and earnings have improved over the past three years. On the other hand, growth expectations were just lowered, and there is a relatively quiet yet very dangerous threat emerging, which goes by the name of PayPal. As you might already know, PayPal is a segment of eBay Inc. (NASDAQ:EBAY). Therefore, you have to consider whether you would put your money on Western Union’s management team or eBay’s management team. Any prudent investor would look at past results for both companies and conclude that eBay is the safer bet.

Let’s take a look at some important numbers for Western Union before forming an opinion…