Interactive Investor

ii view: Experian tweaks sales estimates higher

14th January 2022 11:32

Keith Bowman from interactive investor

Over 120 million global consumers supply this FTSE-100 company with data. We assess prospects.  

Third-quarter trading update to 31 December

  • Total global revenue up 14%

Guidance:

  • Now expects total full year revenue growth of 16% to 17%, up from a previous 15% to 17%

ii round-up:

Global information services company Experian (LSE:EXPN) today reported third-quarter revenue growth of 14% as consumer confidence to borrow continued to recover from the worst of the pandemic. 

The Dublin headquartered company enjoyed revenue gains across all its geographical regions, with its free global consumer membership base reaching 128 million from a previous half-year total of 122 million. Its data helps consumers buy cars and houses and helps companies offer credit prudently.

Experian shares retreated by around 1.5% in UK trading, having gained by over 60% since pandemic induced market lows back in March 2020. Shares for US rival Equifax (NYSE:EFX) have more than doubled during that time, while the wider FTSE 100 index is up by 51%. 

Experian now expects total full-year revenue growth of 16-17%. That’s up from management’s previous estimate of between 15% and 17%. Organic revenue growth of 12-13% is now forecast from a previous 11-13%.

Broker UBS flagged its expectation for potential small upgrades to full-year profit. It currently rates the shares as a "buy" with a price target of £36. 

North America, accounting for around two-thirds of overall sales, enjoyed the biggest organic revenue increase during the quarter of 13%. Both Latin America and the UK and Ireland, accounting for around a tenth of sales each, reported organic revenue gains of 11% and 8% respectively. 

Its smallest region by sales, Europe, the Middle East and Africa; along with the Asian Pacific, reported flat organic revenues but a 4% total revenue gain.

Full-year results to the end of March are scheduled for 18 May.  

ii view:

Experian’s Business-to-Business activities help corporations provide better customer experiences by managing and analysing data that will help them solve problems, drive better decisions and outcomes, and prevent fraud. Its Consumer Services business aids millions of people in countries such as the USA, the UK and Brazil better manage and improve their financial position and helps them to protect against fraud and identity theft. Experian’s data from consumers is often obtained for free, then analysed and later sold to business customers.  

For investors, the pandemic has demonstrated Experian’s economic susceptibility. Consumers are far less likely to take on credit and make big ticket purchases if their jobs could be lost. An estimated one-year price/earnings (PE) ratio above the three- and 10-year averages also suggests the shares are not obviously cheap. 

But growth in data generally looks to offer ongoing opportunity. Its global free consumer membership base, generating data, now totals 128 million. And bolt-on acquisitions continue to be made. In all, and while an uncertain economic outlook gives some reason for caution, the increasing value of data still looks to provide solid long-term foundation for ongoing investor support.

Positives: 

  • Company enjoys both product and geographical diversity
  • Raising full year revenue forecasts

Negatives:

  • Ongoing economic and Covid related uncertainty
  • Subject to currency movements

The average rating of stock market analysts:

Buy

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