How do MoneyGram’s margins compare to Western Union’s?
TS: That’s where we see potential for improvement. Western Union’s consumer-to-consumer operating margins have been in the 30% range over the past four years – a level reached over a long time through operating leverage. MoneyGram is years behind that, with funds-transfer margins we estimate at around 15%. As it continues to grow – we think funds-transfer revenues will grow 20% annually over the next five years – costs won’t increase commensurately and margins should expand. How do you see that translating into upside for the shares, now at $28? TS: We see total revenues growing about 14% per year over the next five years and operating margins increasing from just under 16% to 17%. Some of the margin gains in funds-transfer are likely to be offset by margin compression in the money-order and other businesses. Overall, we expect EPS to increase 15% annually and at a terminal 16x multiple in five years, our five-year target price is $50. Discounted back, our intrinsic value today is arou
