Morningstar | TRU Updated Forecasts and Estimates from 25 Jul 2018
TransUnion's second-quarter results showed the company maintaining its momentum on the top line. Revenue was up 19% year over year, and 13% on an organic basis. We still believe that management’s focus on product innovation, the firm's leading position in India, and its partnerships in the consumer channel will combine to allow TransUnion to outperform its larger peers in terms of growth. We maintain our $68 fair value estimate and wide moat rating.The U.S. information services segment had a strong quarter, with revenue up 20% year over year. While that figure was aided by acquisitions, underlying growth appears strong, with management pointing to trended credit data and the insurance vertical as key drivers.
The international segment grew 22% year over year as well. We remain impressed with the company's growth in India, which maintained a growth rate of 30% during the period. In our view, replicating the credit bureau business model in emerging markets is the most value-creative long-term opportunity for the credit bureaus, and India is the largest opportunity. We are pleased to see TransUnion continuing to benefit from its leading market share position in this country.
The consumer segment was up 12% year over year, in part aided by some business TransUnion won as a result of last year's breach at Equifax. We still believe that TransUnion's partnerships with companies such as Credit Karma give it the best near-term growth profile in this area.
Despite the strong results on the top line, adjusted EBITDA margin was flat year over year at 39.2%. While we still believe the scalable nature of the business will allow for modest but steady margin improvement over time, we expect a temporary halt this year as the company consolidates recent margin gains and invests for future growth.
During the quarter, TransUnion closed on three acquisitions. The most material is CallCredit, the second-largest credit bureau in the U.K. We like that the company is focused on expanding its global footprint, and management reiterated its goal to reduce costs at CallCredit by at least $30 million. We believe achieving this target would make the purchase price reasonable.
For more details on our views on the credit bureau industry, please see our recent report "The Credit Bureaus Have Wide Moats That Can't Be Breached," published on July 11, 2018.
TransUnion is an information and insights company. The company provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses. The company has the following reportable segments: United States Markets, which provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses; International, which provides services similar to its United States Markets segment to businesses in select regions outside the United States; and Consumer Interactive, which provides solutions that help consumers manage their personal finances and take precautions against identity theft.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
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