Equifax: Slow and Steady

10/22/2015 7:00 am EST

Focus: STOCKS

Timothy Lutts

Publisher, Cabot Heritage Corporation

Most Americans know our latest featured recommendation, as it’s one of the three biggest companies in the credit rating business, notes Timothy Lutts, editor of Cabot Stock of the Month.

Most people assume that Equifax (EFX) is a giant company...but it’s not. With annual revenues of roughly $2.5 billion it’s not so big that it can’t grow, but it’s not so small that it trades irrationally. To some investors, that’s the best of both worlds.

The company is headquartered in Atlanta, where it traces its roots to a company founded in 1899. From the beginning, it’s been focused on acquiring and distributing (for a price) data on the creditworthiness of both individuals and business.

Right now, it has data on roughly 600 million consumers and 81 million businesses, worldwide.

The company has grown revenues every year of the past decade except 2008, when revenues shrank by 11%.

In the years since, revenues have grown 8%, 5%, 6%, 11%, and 6%. That’s not rapid growth but it’s sufficient and it’s fairly dependable.

Last year, the company received 45% of its revenues from US consumer information solutions, basically information on individuals. It received 26% of its revenues from international sources.

It received 20% of its revenues from its Workforce Solutions unit, which helps employers manage employee data. Finally, it received 9% from personal solutions, charging consumers to see their own credit scores.

Looking forward, I expect continued growth, not least because Equifax is continuing to grow internationally.

The stock’s action is a major factor in my recommendation. EFX is not a hot stock. Rather, it’s been a steady performer.

More than 1,000 institutions own it and those institutions are likely to continue holding it as long as the company and stock continue to fit their criteria.

Bottom line: This is not an investment without risk, but most of the risk today is market risk. I think if you can buy here, or down toward the stock’s 50-day moving average at $94, your odds will be pretty good.

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