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Last update on 2024-06-07

Western Union (WU) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Western Union (WU) achieves a Piotroski F-Score of 7/9 in 2023, indicating strong financial health driven by robust profitability, cash flow, and efficient asset utilization.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 7

We're running Western Union (WU) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score is a tool ranging from 0 to 9, highlighting a company's financial stability by evaluating profitability, liquidity, and efficiency. Western Union (WU) received a score of 7, indicating a strong financial position. Key points included positive net income of $626 million and cash flow from operations of $783.1 million in 2023. Despite a drop in Return on Assets (ROA) and Gross Margin, the company maintained strong cash flow and reduced its outstanding shares significantly. However, a slight increase in leverage and a Gross Margin decline were noted as concerns.

Insights for Value Investors Seeking Stable Income

Western Union (WU) shows solid financial health with a Piotroski Score of 7. The positive net income, strong cash flow, and reduction in outstanding shares are significant strengths. However, potential investors should note concerns such as the declining ROA and Gross Margin, alongside a slight increase in leverage. Hence, WU appears to be a worthwhile consideration for investment, but further scrutiny into the underlying issues would be advisable before making a final decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Western Union (WU)

Company has a positive net income?

Net income indicates the profitability of a company after all expenses have been deducted. A positive net income suggests operational success and financial health.

Historical Net Income of Western Union (WU)

In 2023, Western Union (WU) recorded a net income of $626 million, which is positive. Consequently, WU earns 1 point for this criterion. Historically, the company has managed to maintain a positive net income for most of the past two decades with two exceptions: 2016 with a dip to $253 million and 2017 experiencing a significant loss of -$557.1 million due to then-mentioned restructuring and legal expenses. Despite economic fluctuations, WU has shown resilience in recovering its profitability. Securing a positive net income also suggests prudent fiscal management and operational efficiency, especially in a volatile industry like financial services.

Company has a positive cash flow?

Cash Flow from Operations is an indicator of the amount of cash generated by a company's core business.

Historical Operating Cash Flow of Western Union (WU)

Western Union (WU) reported a Cash Flow from Operations (CFO) of $783.1 million in 2023. Since the CFO is positive, it garners a score of 1 point in the Piotroski analysis. This trend indicates a pivot away from the weakening observed in 2022 ($581.6 million). Historical data further reveals a fluctuating cash flow pattern over the past two decades but mostly trending positively, signifying a relatively stable operating performance.

Return on Assets (ROA) are growing?

The Return on Assets (ROA) measures a company's profitability in relation to total assets. It indicates how effectively a company uses its assets to generate earnings.

Historical change in Return on Assets (ROA) of Western Union (WU)

Comparing Western Union's ROA of 0.075 in 2023 with an ROA of 0.1051 in 2022, there is a noticeable decline. Typically, a falling ROA could be a red flag indicating underperforming assets or declining profitability, leading to a score of 0 as the ROA decreased in 2023. Over the past 20 years, Western Union's ROA fluctuations align with industry trends, often faring slightly worse than the industry median. For example, when the median ROA was at its lowest at 0.4227 in 2003, Western Union also struggled. Their highest ROA of 0.1051 in 2022 is still significantly below the historical industry median peaks. Despite recent improvements, the decline in 2023 indicates reduced efficiency in generating profits from its assets.

Operating Cashflow are higher than Netincome?

This criterion assesses whether the company's operating cash flow exceeds net income, indicating a healthy cash generation capability.

Historical accruals of Western Union (WU)

For Western Union (WU) in 2023, the operating cash flow (OCF) stands at $783.1 million, while the net income (NI) is $626 million. Since the OCF is indeed higher than the NI, this signifies a positive trend, securing 1 point in the Piotroski Score. This excellent ratio also displays that WU is efficiently converting its revenues into cash, allowing it to cover its expenses and reinvest effectively. Looking at the historical data, WU has consistently maintained a strong OCF higher than its NI in most of the past 20 years with occasional dips. For instance, in 2007, the OCF was about $1.1 billion compared to an NI of $857.3 million, indicating robust cash flow management. Therefore, this trend not only suggests current financial health but also reflects long-term operational efficiency and prudent financial management.

Liquidity of Western Union (WU)

Leverage is declining?

Examining leverage is crucial as it indicates the amount of debt a company is using to finance its assets. High leverage means increased financial risk.

Historical leverage of Western Union (WU)

In 2022, Western Union had a leverage of 0.2868, which increased slightly to 0.2808 in 2023, marking a marginal increase. This increase is concerning as it shows WU is employing more debt relative to its equity to finance its operations. Historically, from the provided data over the last two decades, leverage has seen significant fluctuations, peaking notably in 2006 at 0.563, then on a general declining trajectory before settling into the recent figures. This rising leverage trend in the most recent year reflects a modest but significant shift and does not earn a point in the Piotroski analyses as it represents increased financial risk.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with short-term assets, crucial for assessing liquidity.

Historical Current Ratio of Western Union (WU)

Western Union's Current Ratio increased from 0.9972 in 2022 to 1.0064 in 2023. This marginal increase, though slight, denotes a better liquidity position and is a positive trend, earning a score of 1 for this criterion. Historically, Western Union's Current Ratio has varied, with notable highs like 1.9299 in 2005 and lows such as 0.8444 in 2017. Although the 2023 ratio is an improvement over 2022, it's still below the industry's median of 1.4517, indicating there may be room for further enhancement in liquidity management.

Number of shares not diluted?

Change in Shares Outstanding refers to the year-over-year variation in the number of shares a company has issued. This criterion is pivotal for understanding shareholder value.

Historical outstanding shares of Western Union (WU)

In 2023, the outstanding shares of Western Union (WU) decreased to 370,800,000 from 387,200,000 in 2022. This reduction results in one point as part of the Piotroski score, signifying a positive trend and potentially reflecting share buybacks or improved capital efficiency. Notably, since 2003, WU has consistently decreased its outstanding shares from 763,900,000 to 370,800,000 in 2023. This long-term trend can signal a shareholder-friendly approach, ultimately enhancing earnings per share (EPS) for existing shareholders.

Operating of Western Union (WU)

Cross Margin is growing?

Gross Margin measures a company's profitability and efficiency in managing its production costs relative to its revenue. A higher Gross Margin indicates better cost management and profitability.

Historical gross margin of Western Union (WU)

In 2023, Western Union (WU) reported a Gross Margin of 0.3868, which marks a decrease from 0.4132 in 2022. This trend is negative as it suggests that the company's profitability and efficiency in managing production costs have worsened compared to the previous year. Over a 20-year period, it is observed that WU's Gross Margin has generally trailed the industry median, marking a gross margin fluctuation from 0 in 2003 to 0.3868 in 2023. While the industry's median gross margin peaked significantly high in several years (e.g., 0.8211 in 2015), WU's gross margin stayed relatively lower. The 2023 Gross Margin score is thus set to 0 due to the unfavorable annual comparison and consistent lower margins against the industry standards.

Asset Turnover Ratio is growing?

Asset Turnover is a measure of a company's efficiency in using its assets to generate sales.

Historical asset turnover ratio of Western Union (WU)

Comparing Western Union's Asset Turnover in 2023 (0.5219) to that in 2022 (0.5168) reveals an increase in the ratio. The figure rose from 0.5168 to 0.5219, showing a slight improvement in the efficiency with which the company utilizes its assets to generate revenue. Although this increase is marginal, it is a positive sign, especially given the downward trend observed in some preceding years. Over the past 20 years, Western Union's Asset Turnover peaked at 2.5522 in 2003 and generally trended downwards, hitting a low of 0.5168 in 2022 before this recent rise. The increment signals a minor but favorable shift in Western Union's operational efficiency, adding 1 point to its Piotroski score for this criterion.


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