Equifax Inc. (EFX - Free Report) is benefitting from strategic acquisitions and joint ventures, which will help the company grow in the long run.
With expected long-term earnings per share (EPS) growth rate of 7.5% and a market cap of $15.9 billion, it seems to be a stock that investors should retain in their portfolio now.
Despite troubles related to data breach, the company has registered a 4.1% revenue growth in the first quarter of 2018.
Let’s take a look at the factors that bode well for the company.
The company undertakes strategic acquisitions to strengthen the core business.
In July 2018, Equifax acquired DataX, a leading specialty finance credit reporting agency and alternative data provider to lenders. In 2017, the company acquired ID Watchdog, one of the leading providers of identity theft protection and resolution services to the Employee Benefits marketplace. In 2016, Equifax completed the acquisition of Veda Group Limited, the leading Australian credit information provider.
These acquisitions are expected to drive the top and the bottom line in the long run.
Equifax has shown great interest in joint ventures that will expand its business internationally. Joint ventures (“JVs”) keep operating costs down and require no integration time during the diversification of the revenue source.
The company merged credit reporting operations of its Brazilian subsidiary with Boa Vista Servicos S.A. to harness the immense growth potential of the Brazilian credit data market. Boa Vista, the second-largest consumer credit bureau in Brazil, and Equifax own 15% equity interest in it.
Additionally, the company also owns around 50% stake in Russia-based credit reporting agency, Global Payments Credit Services LLC, and 49% interest in the Indian credit reporting agency, Equifax Credit Information Services Private Limited (a JV between Equifax and six Indian financial institutions).
Solid Product Portfolio
Equifax deploys advanced statistical techniques and proprietary tools to analyze all available data and create customized insights, decision-making solutions as well as processing services. This helps customers understand, manage and protect their clients’ information and make more informed financial decisions. We believe that a solid product portfolio and a clear understanding of the sector will keep Equifax stay competitive.
The cyber breach faced by the company, through which the perpetrators stole highly-sensitive personal data of approximately 143 million, has heavily tarnished the brand image, reputation and credibility of Equifax. The company is bearing the brunt of higher costs as it has increased spending on technology post the incident. However, we believe that synergies from acquisitions along with continued general consumer credit activity, product innovation, initiatives to boost enterprise growth and efficient business executions will boost growth in the long run.
Zacks Rank & Stocks to Consider
Currently, Equifax carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Business Services Sector include Information Services Group, Inc. (III - Free Report) , Broadridge Financial Solutions, Inc. (BR - Free Report) , and Paychex, Inc. (PAYX - Free Report) , each carrying a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for Information Services, Broadridge and Paychex is 14%, 10%, and 8.4%, respectively.
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