Equifax Looks Attractive on Diversified Client Base, Risks Remain
On Jul 7, 2014, we issued an updated research report on Equifax Inc. (EFX).
Equifax is a leading information services provider to consumers and businesses. The company’s offerings are of great importance to its customers as they use the credit information and related analytical services and data to process applications for new credit cards, automobile loans, home and equity loans and other consumer loans. This helps customers understand, manage and protect their clients’ information and take better-informed financial decisions. We believe that a solid product portfolio and a clear understanding of the sector will keep Equifax ahead of its peers.
Equifax also serves a wide range of industries, such as financial, mortgage, consumer, commercial, telecommunications, retail, human resources and automotive. This diversified client base is extremely beneficial as weakness in any sector can be balanced with strength in the others.
Additionally, the company has made strategic acquisitions to supplement its core business. During 2013, Equifax acquired several small companies in addition to TrustedID, a direct-to-consumer identity protection business. Moreover, in Jan 2014, Equifax acquired TDX Group, a U.K.-based debt-management firm, for $327.0 million. We believe that the acquisition will enable Equifax to provide a broad insight into consumer performance, financial status, capabilities of customers and market opportunities. Moreover, it will further solidify Equifax’s presence in the U.K., which in turn will boost its revenues.
Apart from acquisitions, Equifax has remained enthusiastic about forming joint ventures that could expand its business internationally. Joint ventures keep operating costs down and need no integration time while diversifying the revenue source. To tap the immense growth opportunity in the Brazilian credit data market, Equifax merged credit reporting operations of its Brazilian subsidiary with Boa Vista Servicos S.A., the second-largest consumer credit bureau in Brazil. We believe that the company’s investments in the joint ventures will yield desired results and help it to register solid growth over the long term.
However, Equifax has a highly leveraged balance sheet. The company had a net debt position of $1.53 billion at the end of first-quarter 2014 (ended Mar 31, 2014), which increased from $1.21 billion at the end of 2013. Thus, the company is in constant need of generating adequate operating cash flows to service its debt.
Going forward, competition from Automatic Data Processing Inc. (ADP), Fiserv Inc. (FISV), Moody’s Corp. and uncertainty in the mortgage sector are the headwinds.
Currently, Equifax has a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is SanDisk Corp. (SNDK), which has a Zacks Rank #2 (Buy).
Read the Full Research Report on ADP
Read the Full Research Report on SNDK
Read the Full Research Report on FISV
Read the Full Research Report on EFX
Zacks Investment Research
