ii view: Experian gets excited about prospects

Excitable information services company Experian leaves guidance unchanged. Should investors be excited?

First-quarter trading update to 30 June 2019

• Total revenue up 4%
• Currency adjusted total revenue up 7%
• Currency adjusted organic revenue up 6%

Chief executive Brian Cassin said:

"We have started the year well and in line with our expectations. We are excited about our prospects and for the year ahead our guidance is unchanged."

ii round-up:

Headquartered in Dublin, Experian (LSE:EXPN) is a global information services company. Its biggest division provides credit services to businesses and individuals, helping make decisions on credit or loans being given. 

Employing over 17,000 people across 44 countries, it also provides decision analytics, marketing and consumer services. By sales, North America is by far its biggest region, generating 60% of 2018 revenues, followed by the UK & Ireland, Latin America and the rest of the world. 

During 2018, Experian successfully grew its direct relationships with consumers. Free consumer memberships reach over 55 million combined across its three major markets of the US, Brazil and the UK, up from 40 million the year before. 

It also launched Experian Boost, giving US consumers the ability to potentially change their credit score by adding more information to their credit file.

The group's first-quarter trading update was inline with management's own expectations. Both North America and Latin America traded well, while the performance from its UK & Ireland business was flat given strong comparisons with contract wins last year. 

Guidance for the full year was left unchanged. 

ii view:

An increase in credit and big data has benefitted companies such as Experian, allowing them to provide quicker and more reliable assessments of credit worthiness. Widening access to affordable credit in emerging markets has also helped grow its international diversity. 

From an investor's prospective, the shares are not obviously cheap, sat on a prospective price earnings (PE) ratio of just under 30, compared to a 10-year average of around 21. The forward dividend yield, although covered more than twice by earnings, again is not highly attractive at around 1.6%. However, full-year guidance has been left unchanged, suggesting management remain comfortable with progress so far. 

Positives: 

• Annual results guidance left unchanged
• Organic revenue for North America up 8%
• Company enjoys product and geographic diversity

Negatives:

• Revenue growth down versus fourth quarter of 2018
• UK & Ireland revenue flat
• Currency movements can drag on performance

The average rating of stock market analysts:

Weak buy