Summary
- Equifax has a simple, stable business model selling credit reports.
- Despite COVID-19, it has been performing well.
- With consumers more strained due to the economy, there is a higher demand for credit and, by extension, credit reports, making Equifax likely to improve performance.
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When stability becomes a habit, maturity and clarity follow. – BKS Iyengar
Equifax (NYSE:EFX), one of the three major credit reporting agencies worldwide. They collect data on 800 million individuals and 88 million businesses. Them, and their brethren of Experian and TransUnion, are the go-to companies that most businesses use when deciding whether to grant you credit. And, due to its size in the market, Equifax is not a sexy, high-growth stock. It is stability itself and, in times of instability, this may be what every investor needs in their portfolio.
This can be seen by its chart against the S&P, below. While it wasn’t spared from Black Monday and, from its higher base, it lost a greater percentage on the day, it recovered this loss by the end of May, compared to the end of July for the broader S&P 500.
And, while it may not be a sexy, tech stock, it kept up to pace with the S&P Information Technology Index for most of the year (shown below). Remember, the Information Technology sector was one of the few sectors where some companies, such as Zoom, managed to increase revenues and profits due to the COVID-19 lockdown. And yet, the unsexy Equifax managed to keep track of them for most the year.
So, an unsexy stock doesn’t make for unsexy returns. It seems analysts don’t necessarily see this picture. Below are the earnings estimates for the past few years compared to the actual EPS booked.
