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Equifax (EFX) Up on Buyouts and Innovation, Debt Woe Stays

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Equifax Inc.’s (EFX - Free Report) top line is showing a decent growth rate over the past few years, driven by product innovation and continued general consumer credit activity.

The company recently reported second-quarter 2021 adjusted earnings per share of $1.98 that beat the Zacks Consensus Estimate by 15.8%. Revenues of $1.23 billion outpaced the consensus estimate by 6.4%. Shares have gained 59.4% over the past year against 7.6% rally of the industry it belongs to.

How is Equifax Doing?

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 for the company, as weakness in any sector can be balanced by strength in the others.

The company’s top line has shown decent growth rates in the last few years. Total revenues have grown at a compounded annual growth rate (CAGR) of 5.6% in the last five years (2016-2020). Revenues improved 26.6% year over year in the first quarter of 2021. 

Acquisitions, over time, have enabled the company to provide a broad insight into consumer performance, financial status, capabilities of customers and market opportunities. We believe synergies from acquisitions, in addition to continued general consumer credit activity, product innovation, initiatives to foster enterprise growth and efficient business executions, will continue to drive Equifax’s revenues over the long run.

Meanwhile, Equifax’s cash and cash equivalent of $458.1 million at the end of the second quarter was well below the long-term debt level of $4.38 billion, underscoring that the company does not have enough cash to meet this debt burden. The cash level cannot even meet the short-term debt of $600.7 million.

Zacks Rank and Other Stocks to Consider

Equifax currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Some other similarly ranked stocks in the broader Zacks Business Services sector are ManpowerGroup Inc. (MAN - Free Report) , Cross Country Healthcare (CCRN - Free Report)  and TransUnion (TRU - Free Report) , each carrying a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for ManpowerGroup, Equifax and TransUnion is pegged at 23.1%, 9.9% and 22%, respectively.