TransUnion’s stock price has taken a beating over the past six months, shedding 22.2% of its value and falling to $68 per share. This may have investors wondering how to approach the situation.
Following the drawdown, is now an opportune time to buy TRU? Find out in our full research report, it’s free.
Why Does TRU Stock Spark Debate?
One of the three major credit bureaus in the United States alongside Equifax and Experian, TransUnion (NYSE: TRU) is a global information and insights company that provides credit reports, fraud prevention tools, and data analytics to help businesses make decisions and consumers manage their financial health.
Two Things to Like:
1. Skyrocketing Revenue Shows Strong Momentum
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, TransUnion’s 11.6% annualized revenue growth over the last five years was excellent. Its growth beat the average business services company and shows its offerings resonate with customers.
2. Projected Revenue Growth Is Remarkable
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.
Over the next 12 months, sell-side analysts expect TransUnion’s revenue to rise by 11.3%, close to its 11.6% annualized growth for the past five years. This projection is admirable and suggests the market is baking in success for its products and services.
One Reason to Be Careful:
Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Although TransUnion has shown solid fundamentals lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.7%, somewhat low compared to the best business services companies that consistently pump out 25%+.
Final Judgment
TransUnion has huge potential even though it has some open questions. With the recent decline, the stock trades at 13.4× forward P/E (or $68 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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