Save, make, understand money

Experienced Investor

Stock of the week: Experian

Paloma Kubiak
Written By:
Paloma Kubiak

Helal Miah, investment research analyst at The Share Centre, explains why Experian is this week’s stock pick.

This week’s stock of the week is global information service supplier Experian following a positive first quarter trading update last week. After a fairly positive set of full year results there was more to cheer from in this report as the group enjoyed organic revenue growth of 8%, chiefly driven by its North American and EMEA/Asia Pacific businesses where both regions experienced organic revenue growth of 11% where new contracts were the driving force.

Despite good growth abroad, the group only managed organic growth rates of 3% in the UK & Ireland as lower credit monitoring revenues within the Consumer Services division offset faster growth in the B2B business. Latin America was also slow, chiefly down to the weaker macro-economic conditions in Brazil.

Nonetheless, the company has been keen to expand its geographic reach and reported good growth in Europe, Latin America and Asia Pacific and to make bolt-on acquisitions where appropriate; most recently securing the acquisition of Fintech group Runpath.

Overall, first quarter figures were in-line with analyst expectations with the shares following the report just tracking the gains on the rest of the market. However, management did update the market regarding the impact of foreign currency movements from a 1% hit to EBIT to 4%; again this is no real surprise to the market.

Experian’s share price continues to trade near record highs; despite this, we still believe it is still worth considering buying them for a diversified portfolio as international growth is still making good progress and there is some hope that the worst in the UK & Ireland may be over.

The industries it serves are increasingly in need of its ID checking, credit reference checking and debt collection services. The group generates strong cash flows and good margins and may be an attractive option for investors seeking capital growth and willing to accept a medium level of risk.