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TransUnion (TRU) Rides on Acquisitions, High Debt a Concern
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TransUnion (TRU - Free Report) is benefitting from a prosperous Big Data and analytics market, acquisitions as well as broad customers base.
Recently, the company delivered mixed figures in the third-quarter 2018 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. Adjusted earnings per share (EPS) of 65 cents beat the consensus mark by 2 cents and rallied 33% year over year. Total revenues of $604 million missed the consensus mark by $13 million. Nevertheless, the top line was up 21% on a reported basis and 22% in terms of constant currency.
TransUnion has an impressive surprise history. It beat estimates in each of the trailing four quarters, the average being 5.1%. For the fourth quarter, the consensus estimate remained unchanged at 64 cents in the past 60 days.
In a year’s time, shares of the company have gained 25.4% compared with the industry’s rise of 13.1%.
Burgeoning Big Data and Analytics Market
TransUnion’s addressable market comprises the prosperous Big Data and analytics market, which is expanding at a rapid pace as companies envisage the advantages of building an analytical enterprise where decisions are derived from data and insights. Numerous underlying trends are supporting this market growth, including the creation of massive amounts of data as well as advances in technology and analytics that allow data to be processed swiftly and efficiently.
Research firm IDC anticipates that worldwide revenues for big data and business analytics (BDA) solutions will reach $260 billion in 2022 at a compounded annual growth rate (“CAGR”) of 11.9%. In order to take advantage of the immense potential growth in the market, TransUnion has leveraged next-generation technology to strengthen analytics capabilities and has further expanded database.
Acquisitions: A Key Growth Strategy
TransUnion’s acquisition strategy is focused on investment in unique and differentiated data assets, acquiring new capabilities for expanding in vertical markets and expanding international footprints.
So far in 2018, TransUnion acquired Rubixis, Callcredit, iovation and Healthcare Payment Specialists. These buyouts are expected to help the company with new market entry and portfolio diversification, moving ahead.
Some notable buyouts of TransUnion in 2017 include DataLink services, FactorTrust and eBureau. These acquisitions are contributing significantly to the company’s top-line growth across all operating segments.
Strong Business Model
The company possesses an attractive business model with highly recurring and diversified revenue streams, significant operating leverage, low capital requirements as well as strong and stable cash flows. In addition, the inherent nature and significance of its solutions in customers’ decision-making provides the company high retention and revenue visibility.
Risks
TransUnion’s balance sheet is highly leveraged. As of Sep 30, 2018, long-term debt was $4.1 billion, while cash and cash equivalents were $226.6 million. Such a cash position implies that the company needs to generate an adequate amount of operating cash flow to pay debt. Moreover, high debt may limit future expansion and worsen risk profile.
The company’s operating segments experience seasonality. The USIS segment witnesses’ soft sales in the first and fourth quarter relative to second and third quarters. The Consumer Interactive segment experienced weaker demand in the second half of the year. Seasonality causes considerable fluctuations in revenues and profits, thus making predictions difficult.
The long-term expected EPS (three to five years) growth rate for Broadridge, Genpact and WEX is 10%, 10% and 15%, respectively.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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TransUnion (TRU) Rides on Acquisitions, High Debt a Concern
TransUnion (TRU - Free Report) is benefitting from a prosperous Big Data and analytics market, acquisitions as well as broad customers base.
Recently, the company delivered mixed figures in the third-quarter 2018 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. Adjusted earnings per share (EPS) of 65 cents beat the consensus mark by 2 cents and rallied 33% year over year. Total revenues of $604 million missed the consensus mark by $13 million. Nevertheless, the top line was up 21% on a reported basis and 22% in terms of constant currency.
TransUnion has an impressive surprise history. It beat estimates in each of the trailing four quarters, the average being 5.1%. For the fourth quarter, the consensus estimate remained unchanged at 64 cents in the past 60 days.
In a year’s time, shares of the company have gained 25.4% compared with the industry’s rise of 13.1%.
Burgeoning Big Data and Analytics Market
TransUnion’s addressable market comprises the prosperous Big Data and analytics market, which is expanding at a rapid pace as companies envisage the advantages of building an analytical enterprise where decisions are derived from data and insights. Numerous underlying trends are supporting this market growth, including the creation of massive amounts of data as well as advances in technology and analytics that allow data to be processed swiftly and efficiently.
Research firm IDC anticipates that worldwide revenues for big data and business analytics (BDA) solutions will reach $260 billion in 2022 at a compounded annual growth rate (“CAGR”) of 11.9%. In order to take advantage of the immense potential growth in the market, TransUnion has leveraged next-generation technology to strengthen analytics capabilities and has further expanded database.
Acquisitions: A Key Growth Strategy
TransUnion’s acquisition strategy is focused on investment in unique and differentiated data assets, acquiring new capabilities for expanding in vertical markets and expanding international footprints.
So far in 2018, TransUnion acquired Rubixis, Callcredit, iovation and Healthcare Payment Specialists. These buyouts are expected to help the company with new market entry and portfolio diversification, moving ahead.
Some notable buyouts of TransUnion in 2017 include DataLink services, FactorTrust and eBureau. These acquisitions are contributing significantly to the company’s top-line growth across all operating segments.
Strong Business Model
The company possesses an attractive business model with highly recurring and diversified revenue streams, significant operating leverage, low capital requirements as well as strong and stable cash flows. In addition, the inherent nature and significance of its solutions in customers’ decision-making provides the company high retention and revenue visibility.
Risks
TransUnion’s balance sheet is highly leveraged. As of Sep 30, 2018, long-term debt was $4.1 billion, while cash and cash equivalents were $226.6 million. Such a cash position implies that the company needs to generate an adequate amount of operating cash flow to pay debt. Moreover, high debt may limit future expansion and worsen risk profile.
The company’s operating segments experience seasonality. The USIS segment witnesses’ soft sales in the first and fourth quarter relative to second and third quarters. The Consumer Interactive segment experienced weaker demand in the second half of the year. Seasonality causes considerable fluctuations in revenues and profits, thus making predictions difficult.
Zacks Rank & Key Picks
Currently, TransUnion carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Business Services sector include Broadridge Financial Solutions, Inc. (BR - Free Report) , Genpact Limited (G - Free Report) and WEX Inc. (WEX - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected EPS (three to five years) growth rate for Broadridge, Genpact and WEX is 10%, 10% and 15%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>