Equifax to Perform In-Line
Equifax, Inc. (EFX - Analyst Report) is finding new avenues for growth in the International, Personal, and Commercial Solution businesses. The company’s growing reliance on subscription revenue provides a steady revenue stream, and the TALX acquisition is accretive to earnings.
However, continued weakness in mortgage activity led to a 3.3% decline in mortgage-related revenues during the first half of 2008. Moreover, Equifax is very sensitive to the consumer and financial markets, and is therefore facing the effects of a sluggish economic environment.
As a result, we continue to maintain a Hold recommendation on EFX shares. Shares of Equifax are currently trading at a P/E multiple of 14.1x our 2008 EPS estimate of $2.54. This multiple is a discount to its peer group. We believe that the stock will perform in line with the broader equity market over the near-term.
Over the last six years, EFX has traded in a range of 14x to 20x forward earnings. Given the challenging market for equities, we continue to expect that the stock will trade at the low-end of this range. Our target price of $37.50 represents a multiple of 13.5x our 2009 EPS estimate of $2.78, a discount to the industry mean.