The basics: It has a yield around 4%, a P/E around 6 and a normalized of P/E of around 7.5. They are in the business of providing money transfers — people walk into a branch and transfer a given amount of money for someone else to collect at a different branch. Most of the transfers are made to people in countries that don't have reliable banking systems. Western Union then collects a fee, which is 100% of their profit.
In terms of moat they are the market leader, but have only hold around 20% of the market share, so there is plenty of room to grow. Their moat is primarily in terms of real estate — they have more locations than any other money transfer business, they are more visible than any other of their competitors and in turn they have a better brand.
Their primary competitors include Euronet, Moneygram and Wex, but in my eyes WU definitely has a stronghold on this business, and I don't see the competition as a threat to declining margins.
Over the last 10 years its profit has been relatively stable, around $900 million, with cash flow pretty much corresponding to the profit. In the same period they have reduced their shares outstanding from $750 million to $600 million, and increased the dividend to $0.38 cents per share. The yield is currently at 4%. All of the key personnel have been with the company for 10 or more years, and having been promoted from within the business, it is fair to assume that they have a good idea of what's going on in the different branches of the company, and how to improve them. Furthermore, most members of management have a lot of their net worth in the stock, and this is part of the reason for the friendliness towards shareholders.
The risks are primarily macro risks — further decline in the global economy, improvement of the banking systems in the third world (which will take time), and on the micro side, there is always the risk of new and old competition cannibalizing the business. I don't see this as a major threat as the barriers to entry are relatively high, in terms of high costs, primarily related to real estate, but also in terms of networking around the globe, and building a brand.
I see this stock as very undervalued. A very conservative estimate of the intrinsic value of the business is 10 B, which would imply a margin of safety of 30%. This assumes no growth and a P/E of 10 (WEX and euronet's P/E is in the mid 20s). In my eyes this is still extremely low for a shareholder-oriented company, with a sizable moat, solid management, good profitability and overall a very robust company.
I see this company as being worth around $15 billion. Throw in a 4% yield and a minimum of risk, and I have all the reason I need to invest in this great business.
Disclosure: Long WU.