EUR 850.00 For Business Accounts Only

Morningstar | EXPGY Updated Forecasts and Estimates from 03 Jun 2019

Experian's core is its credit bureau business, and it is an established leader in the United States and the United Kingdom. But it has not been content to simply operate its existing businesses and has been expanding through acquisitions into new businesses and new countries. Already the most internationally diversified among its peers, Experian has been expanding even further geographically. The company now generates about one fourth of its revenue outside North America and the U.K., which we think positions it well to increase long-term revenue and shareholder value. Experian has a dominant position in Brazil, and we think the growth of middle-class populations in emerging markets will be a long-term secular tailwind. However, given the set of conditions necessary to expand into new markets, we think near-term geographic expansion will most likely be only an incremental addition to more modest growth in developed markets. We see some long-term opportunities in Asia, most notably India, but building a database from scratch requires a very long buildout period, and the payoff is uncertain as there is no competitive advantage until data assets are established.While we like the long-term picture, Experian has been battling some material near-term headwinds. As a result of regulatory pressure and new competition, the firm is rebranding and transitioning its consumer business in the U.S. and the U.K. In our view, some of the advantages Experian enjoyed as the first mover in the consumer-oriented area have waned, but revenue has started to grow again in the U.S. This inspires confidence that the U.K. operations, which are in an earlier state of transition, will stabilize as well. Longer term, we think Experian's strategy to compete instead of partner with new entrants such as Credit Karma offers potential to capture more value in the area, even though this path limits growth in the near term. Another difficulty is that its operations in emerging markets, which had been Experian's main engine for growth, have been struggling a bit due to currency and macroeconomic headwinds. Still, we still think the long-term demographic trends are in the company's favor.