EFX Drops 8.5% In A Day, Now Is Not The Time To Buy The Stock

We believe there is a near-equal mix of good and bad in EFX stock given its overall Moderate operating performance and financial condition. But keeping in mind its High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $29 Bil in market cap, Equifax provides information solutions and HR automation outsourcing, including credit services, fraud prevention, identity verification, and consulting for businesses, governments, and consumers globally.

[1] Valuation Looks High

This table highlights how EFX is valued vs broader market. For more details see: EFX Valuation Ratios

[2] Growth Is Moderate

• Equifax has seen its top line grow at an average rate of 4.3% over the last 3 years
• Its revenues have grown 6.9% from $5.5 Bil to $5.8 Bil in the last 12 months
• Also, its quarterly revenues grew 7.4% to $1.5 Bil in the most recent quarter from $1.4 Bil a year ago.

This table highlights how EFX is growing vs broader market. For more details see: EFX Revenue Comparison

[3] Profitability Appears Moderate

• EFX last 12 month operating income was $1.1 Bil representing operating margin of 18.5%
• With cash flow margin of 23.8%, it generated nearly $1.4 Bil in operating cash flow over this period
• For the same period, EFX generated nearly $640 Mil in net income, suggesting net margin of about 11.0%

This table highlights how EFX profitability vs broader market. For more details see: EFX Operating Income Comparison

[4] Financial Stability Looks Strong

• EFX Debt was $4.9 Bil at the end of the most recent quarter, while its current Market Cap is $29 Bil. This implies Debt-to-Equity Ratio of 17.0%
• EFX Cash (including cash equivalents) makes up $189 Mil of $12 Bil in total Assets. This yields a Cash-to-Assets Ratio of 1.6%

[4] Downturn Resilience Is Moderate

EFX saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• EFX stock fell 49.4% from a high of $297.05 on 13 December 2021 to $150.24 on 20 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 21 August 2024
• Since then, the stock increased to a high of $307.13 on 2 September 2024 , and currently trades at $232.35

 
2020 Covid Pandemic

• EFX stock fell 35.8% from a high of $162.87 on 4 March 2020 to $104.62 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 2 June 2020

 
2008 Global Financial Crisis

• EFX stock fell 57.2% from a high of $46.26 on 12 July 2007 to $19.79 on 9 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 26 April 2012

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read EFX Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.