TransUnion Earnings are Accelerating


The firm is one of three major credit rating agencies that offer decision making solutions to businesses around the world.

Alongside Experian and Equifax, TransUrban operates in what is effectively an oligopolistic industry with strong pricing power. The firm has developed a powerful database over the past 48 years that would, to say the least, be difficult and costly for any potential new entrant to replicate.

To put it into context TransUrban database contains 40 petabytes of data with each petabyte being one million gigabytes.  TransUrban uses its database to provide financial information on over 1 billion consumers worldwide with clients from the healthcare, insurance and financial industries using its services to generate accurate credit information and models to manage their own exposures.

The credit ratings industry has seen a significant ramping up of growth in recent years as big data has seen significant advances in processing power while end users have seen increasing demand due to new banking regulations, new lending platforms (such as peer to peer lending and pay day loans) as well as increasing growth from emerging markets.

The figures announced yesterday strongly support the growth stock thesis. Fourth quarter revenue rose 13% while adjusted EPS grew 45% and the company beat consensus forecasts by 7.6% and 25.7% respectively. Full year adjusted EPS grew 38% to $1.50 and follows average annual growth over the past three years of 13% for revenues and 40% for earnings.

With guidance the company was more conservative in its forecasts for 8 to 9% revenue growth and 14 to 17% adjusted EPS growth. However we note TransUnion’s track record of significant top and bottom line beats and also note third party forecasts, by external providers such as International Data Forecasts, that estimate 15% growth through to 2019 for big data and analytics.

The stock jumped 10% following the news and is not cheap with a valuation of 25 times earnings. But with strong growth, secular tailwinds and strong pricing power the stock seems deserving of a large premium.


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Disclosure: The author holds no positions in any of the stocks mentioned nor has any intentions to initiate any in the next 72 hours.