The company was originally spun-off from Viad Corporation (NYSE:VVI) on June 30, 2004 and is a member of the Clear Spin-Off Index (published by the author’s firm) and licensed for the EFT symbol CSD.
Making its products available at 100,000 locations worldwide, MGI operates through two segments; Global Funds Transfer and Payment Systems. Catering to individuals, Global Funds Transfer offers wire money transfer, express bill paying services for utilities, mortgages, and other bill types, money orders at more than 50,000 agent locations across the U.S., gift certificates, official checks, and the processing of share drafts to credit unions. Through its Payment Systems branch, the company offers financial institutions payment processing services, official check outsourcing, and money orders for sale to their customers.
With a market capitalization of $2.52 billion, the company competes with the likes of the U.S. Postal Service, First Data Corporation (FDC), Total System Services Inc. (NYSE:TSS), Western Union Company (NYSE:WU), and Checkfree Corporation (CKFR). In order to maintain competitiveness with these big names, MGI is dedicated to innovation in the money transfer industry. For instance, last October the firm announced a new electronic feature that allows billers to review a payment electronically before accepting or rejecting it. This is primarily catered towards companies with time sensitive financial or legal implications (i.e. foreclosures).
While the operations have proved to be successful for the company, as evidenced by operating margins of 15.93% compared to the industry average of 0.37%, its growth can be seen in other indicators. Its quarterly year over year revenue growth is 19.30% compared to the industry average of 16.70% and it also has a stellar one year net income growth rate of 11.54%.
While growing faster that its peer group average, MGI still seems to be under priced by the market. The stock has a price to earnings [P/E] ratio of 20.68 as compared with the industry average of 27.35. These data points suggest that MGI’s stock is an interesting spin-off with future potential.
Disclosure: Moneygram International Inc. (MGI), is a constituent in the Clear Spin-Off index licensed for the Claymore/Clear Spin-Off ETF [AMEX:CSD]. Mr. Corn is CEO and founder of Clear Indexes LLC which publishes the index and he owns shares of the ETF: CSD. He does not directly own shares in (MGI).
MGI 1-yr chart