ii view: Experian enjoys boom in North & Latin America

In line trading and a 34% gain in the share price during 2019, but where now for Experian?

Third-quarter trading to 31 December 2019

• Organic revenue up 7%
• Full-year expectations unchanged

Chief executive Brian Cassin said:

"We delivered another quarter of good growth as we execute on our strategy of innovation-led growth. Total revenue growth in Q3 was 9% and organic revenue growth was 7%, both at constant exchange rates. At actual exchange rates total growth was 7%. Overall the performance was in line with our expectations and our guidance for the full year is unchanged."

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ii round-up:

Credit and information services company Experian (LSE:EXPN) reported trading in line with the first half in this third-quarter trading update. 

Revenue excluding acquisitions and currency movements rose by 7%, unchanged from the first half, with gains for North America and Latin America continuing to outpace declines in the UK and elsewhere. 

In North America, accounting for over half of group sales, credit data volumes, mortgage and contributions from new products all added to revenue growth of 10%. In Latin America, Brazil again proved the standout performer, fuelled by an ongoing economic and business confidence recovery. Latin American organic revenue jumped by 18%.  

In the UK & Ireland, accounting for around 17% group of sales, longer sales cycles and deferral of decision-making by corporate clients for large software implementations contributed to a 3% retreat in revenues. 

The share price was little changed in early morning UK market trading. 

ii view:

An increase in credit and big data has benefitted companies such as Experian, allowing it to provide quicker and more reliable assessments of credit worthiness. Widening access to affordable credit in emerging markets has also helped grow its international diversity. 

For investors, the shares do not look obviously cheap, sat on a prospective price/earnings ratio of over 30 compared to a 10-year average of just over 20. The historic dividend yield, although covered more than twice by earnings, again is not highly attractive at around 1.4%. However, full-year organic revenue guidance was raised at the half-year results, pointing to robust management confidence in the outlook. 

Positives: 

• Company enjoys both product and geographical diversity
• Five years of consecutive dividend growth

Negatives:

• Declining revenue for its second biggest region the UK & Ireland
• Net debt of $4.06 billion (30 Sept 2019), up from $3.26 billion (31Mar2019)

The average rating of stock market analysts:

Weak buy