Equifax Inc. (EFX) in Atlanta, Ga., is a global data, analytics, and technology company that provides information solutions and human resources business process outsourcing services for businesses, governments, and consumers. The company’s segments include Workforce Solutions, U.S. Information Solutions (USIS), and International.
EFX’s company Kount recently announced that it was growing its operations in the U.K. and expanding its digital identity trust and fraud prevention solutions in Australia, Argentina, Chile, and Peru. In addition, EFX has entered a partnership with Paycor HCM Inc. (PYCR). Paycor customers will be able to offer their employees the benefit of seamless verifications in support of significant life events, such as applying for a loan or social services.
These measures are expected to be revenue and earnings accretive for the company, but EFX’s stock has declined 30.8% in price year-to-date and 13.8% over the past year to close the last trading session at $202.58. It is currently trading 32.5% below its 52-week high of $300.11, which it hit on Dec. 13, 2021.
Here is what could influence the performance of EFX in the coming months:
Robust Financials
EFX’s operating revenue increased 12.3% year-over-year to $1.36 billion for the first quarter, ended March 31, 2022. The company’s operating income increased 8.4% year-over-year to $332.40 million. Also, its net income attributable increased 10% year-over-year to $221.80 million. And its EPS came in at $1.80, representing an increase of 9.7% year-over-year.
Stretched Valuation
In terms of forward non-GAAP P/E, EFX’s 24.85x is 51% higher than the 16.45x industry average. And its 16.85x forward EV/EBITDA is 63.4% higher than the 10.31x industry average. The stock’s 24.62x forward EV/EBIT is 68.9% higher than the 14.57x industry average.
Higher-than-industry Profitability
In terms of trailing-12-month net income margin, EFX’s 15.06% is 122.7% higher than the 6.76% industry average. And its 33.03% trailing-12-month EBITDA margin is 146.9% higher than the 13.38% industry average. Furthermore, the stock’s 22.94% trailing-12-month EBIT margin is significantly higher than the 9.71% industry average.
Favorable Analyst Estimates
Analysts expect EFX’s revenue for its fiscal years 2022 and 2023 to increase by 5.7% and 8.5% year-over-year, respectively, to $5.20 billion and $5.65 billion. Also, its EPS for fiscal 2022 and 2023 is expected to increase 6.7% and 15.7% year-over-year, respectively, to $8.15 and $9.43. It surpassed the Street’s EPS estimates in each of the trailing four quarters.
POWR Ratings Reflect Uncertainty
EFX has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. EFX has a D grade for Value, which is in sync with its 5.87x EV/S, which is 257.9% higher than the 1.64x industry average.
EFX is ranked #30 out of 49 stocks in the Consumer Financial Services industry.
Click here to access EFX’s ratings for Growth, Momentum, Stability, Sentiment, and Quality.
Bottom Line
Although the company’s revenue and EPS for fiscal 2022 and 2023 are expected to increase, EFX is currently trading below its 50-day and 200-day moving averages of $213.08 and $248.60, respectively, indicating a downtrend. Furthermore, the stock is currently trading at a higher valuation than its peers. Thus, we think it could be wise to wait for a better entry point in the stock.
How Does Equifax Inc. (EFX) Stack Up Against its Peers?
While EFX has an overall POWR Rating of C, one might want to consider investing in the following Consumer Financial Services stocks with a B (Buy) rating: EZCORP, Inc. (EZPW), Regional Management Corp. (RM), and OneMain Holdings, Inc. (OMF).
Note that EZPW is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
EFX shares were trading at $199.61 per share on Wednesday afternoon, down $2.97 (-1.47%). Year-to-date, EFX has declined -31.56%, versus a -13.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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