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Here's Why Investors Should Hold on to Equifax (EFX) Stock

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Shares of Equifax Inc. (EFX - Free Report) have gained 30.9% year to date, outperforming the 5.3% rally of the industry it belongs to and 14.2% growth of the Zacks S&P 500 composite.

The company has an impressive Growth Score of A. This style score condenses all the essential metrics from a company’s financial statements to get a true sense of quality and sustainability of its growth.

Equifax has a long-term (three to five years) expected EPS growth rate of 12.6%. Earningsare anticipated to register 18% growth in 2020.

What’s Benefiting the Company?

Equifax serves a wide range of industries, such as financial, mortgage, consumer, employees, telecommunications, automotive, commercial, retail, government, resellers and others. This diversified client base is extremely beneficial as weakness in any sector can be balanced with strength in the others.

Acquisitions, over time, have enabled Equifax to provide a broad insight into consumer performance, their financial status, capabilities of customers and market opportunities.

The recent acquisition of Ansonia Credit Data is expected to increase Equifax Differentiated Data Assets though adding trade intelligence to support transportation, logistics and financial services companies.

The 2019 acquisition of commercial credit risk underwriting and management solutions provider PayNet has strengthened the company’s Commercial business, data assets, and analytics capabilities. 

Some Risks

Equifax has a debt-heavy balance sheet. Total debt at the end of third-quarter 2020 was $4.38 billion, flat sequentially. The company’s cash and cash equivalent of $1.54 billion at the end of the third quarter was well below this debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $1.1 billion.

Zacks Rank and Stocks to Consider

Equifax currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are Republic Services (RSG - Free Report) , Gartner (IT - Free Report) and Insperity (NSP - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Long-term earnings (three to five years) growth rate for Republic Services, Gartner and Insperity is estimated at 9.4%, 13.5% and 15%, respectively.

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