The financial services industry has transformed significantly in the recent years, considering the notable changes in transaction techniques. With digitalization taking center stage, technology is playing a major role. Digitalization of banking and payment services has made it easier for people to conduct transactions.
With the market adapting a quantitative approach to save time, reduce operating expenses and increase work efficiency, companies in this industry should benefit. The Zacks Financial Transaction Services industry currently carries a Zacks Industry Rank #81, which places it in the top 32% of more than 250 Zacks industries and indicates solid near-term growth prospects.
Given this backdrop, it is not a bad idea to undertake a comparative analysis of two Financial Transaction Services stocks — FLEETCOR Technologies FLT and Equifax EFX. Both the stocks are part of the broader Zacks Business Services sector (one of the 16 Zacks sectors). While market capitalization of FLEETCOR Technologies is $25.60 billion, the same for Equifax is $17.26 billion.
As both the stocks carry a Zacks Rank #3 (Hold), we are using certain other parameters to give investors a better insight. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FLEETCOR clearly scores over Equifax in terms of price performance. So far this year, shares of FLEETCOR have gained 62.1% compared with 54.9% rise of Equifax. The industry and Zacks S&P 500 composite registered growth of 41.5% and 14.3%, respectively, in the same time frame.
Earnings growth and stock price gains often serves as indication of a company’s strong prospects.
FLEETCOR’s third-quarter 2019 earnings are projected to grow 13.4% year over year compared with 3.6% for Equifax. Looking at full-year 2019 picture, earnings of FLEETCOR are projected to grow 11.3%, while that of Equifax are expected to decrease 3.3% year over year. For 2020, FLEETCOR’s earnings are expected to register 15.1% growth compared with 7.9% for Equifax.
Further, FLEETCOR has a long-term expected EPS (three to five years) growth rate of 15.6% while the same for Equifax is 8.7%.
Thus, FLEETCOR has an edge over Equifax in terms of quarterly and yearly earnings growth projection.
Earnings Surprise History
Earnings surprise history helps investors to get an idea of the company’s performance in the previous quarters.
FLEETCOR and Equifax have an impressive earnings surprise history. FLEETCOR’s earnings surpassed the Zacks Consensus Estimate in each of the previous four quarters. Equifax’s earnings outpaced the consensus mark in three of the past four quarters.
However, Equifax delivered a higher average positive earnings surprise of 1.9% compared with 1.8% for FLEETCOR.
Earnings Estimate Revisions
The direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Based on third-quarter 2019, and full-year 2019 and 2020 earnings estimate revisions in the past 90 days, FLEETCOR is better placed than Equifax.
The Zacks Consensus Estimate for third-quarter 2019 earnings has increased 0.3% for FLEETCOR versus a decrease of 2.7% for Equifax. For 2019, estimates for FLEETCOR have increased 0.6%, while the same for Equifax has declined 0.5%. For 2020, estimates for FLEETCOR have increased 0.3%, while the same for Equifax has declined 1.8%.
The price to earnings ratio (P/E) metric is used to measure a company's value relative to its earnings. In general, a lower number or multiple is considered better than a higher one.
The trailing 12-month price-to-earnings (P/E - TTM) multiple for FLEETCORand Equifax is 29 and 26.8, respectively, while that of the Zacks S&P 500 composite is 17.8.
Although both the companies compare unfavorably with the benchmark index, Equifax has a lower P/E - TTM value than FLEETCOR.
Our comparative analysis shows that FLEETCOR scores over Equifax in terms of price performance, earnings estimate revisions, and quarterly and yearly earnings growth projection. Equifax has an edge over FLEETCOR in terms of earnings surprise history.
Although a faster share price rally on a year-to-date basis has led to a rich valuation for both stocks compared with the benchmark index, Equifax is cheaper than FLEETCOR.
Stocks to Consider
Some better-ranked stocks in the broader Zacks Business Services sector are Visa V, Huron Consulting HURN and Fiserv FISV, each carrying a Zacks Rank #2 (Buy). Long-term expected EPS growth rate for Visa, Huron Consulting and Fiserv is 16.5%, 13.5% and 12%, respectively.
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Equifax, Inc. (EFX) : Free Stock Analysis Report
FleetCor Technologies, Inc. (FLT) : Free Stock Analysis Report
Huron Consulting Group Inc. (HURN) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
Fiserv, Inc. (FISV) : Free Stock Analysis Report
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