John Rogers Is Buying Western Union Shares as People Still Do Old-Fashioned Things Like Wire Money

Moving money around by mobile phone is a big thing these days. It’s the driving force behind PayPal, which has driven eBay’s (EBAY) profits. Starbucks (SBUX) has partnered with Square mobile payment technology. Others are getting into that, too.

And then there’s Western Union (WU), in the old-fashioned business of wiring cash around. Seems like a backwards-looking business, but John Rogers at the Ariel Appreciation Fund has been buying Western Union shares. It’s now 2.61% of his $1.3 billion portfolio.

Western Union moves money around the world. At the end of 2011, 84% of its revenues were people wiring money to other people (as opposed to businesses). Also, 90% of its 485,000 locations were outside of the U.S. Much of its business is someone in the U.S. wiring money to someone elsewhere. And when its customers wire money, it collects a fee.

WU Net Income TTM Chart

WU Net Income TTM data by YCharts

Even in a recession, its customers have found money to send.

WU Revenue Growth Chart

WU Revenue Growth data by YCharts

And Western Union has done well for investors. Check out its return on invested capital.

WU Return on Invested Capital Chart

WU Return on Invested Capital data by YCharts

Granted, some people use Western Union services for the wrong (read: illegal) reasons. Last March, it was hit with a subpoena relating to an agent in California awaiting trial for money laundering. Late last year, state attorneys general demanded documents relating to consumer fraud complaints. But that seems, sadly, pretty routine at financial institutions these days.

And Western Union’s market is clearly evolving. Its competitor MoneyGram (MGI) just extended its alliance with Wal-Mart (WMT). But Western Union’s earnings come cheap, just 58% of what you’d pay for eBay’s.

WU PE Ratio Chart

WU PE Ratio data by YCharts

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