lundi 3 juin 2019

Transunion (TRU) and credibility

In september 2017, I wrote something about Equifax (EFX), saying it was almost the perfect kind of stock (services bought day after day by countless people and institutions). On paper, that's the perfect business: it doesn't have to reinvent itself and everybody needs it.

However, the hacking of Equifax happened earlier in 2017 and I felt that the reputation of the firm would be damaged for a couple of years at last.

Time passed and proved I was partially right. Because about 1 year and a half later, the shares of EFX went from 100$ to 120$. Not a bad performance, but not good either. 

Even tough the recent performance of Equifax has been so-so, it's still a great business that's going through a rough period. And what about something similar? What about Transunion?

Equifax and Transunion. It's like Visa and Mastercard: practically the same thing, with a different name. Let's compare both: 

Forward PE
Transunion: 21
Equifax: 20

ROE last 5 years
Transunion: 11
Equifax: 16

Annual EPS Growth last 5 years
Transunion: 27%
Equifax: 11%

Projected annual EPS Growth next 5 years
Transunion: 15%
Equifax: 3%

Debt level
Transunion: very high (about 20 times 2018's earnings, which is a lot)
Equifax: high

Transunion really looks great to me, but the debt is very high. Once in a while, I have no problems with a company that has a debt a little too high. But this time, it's too high.

Isn't it funny that a credit score company has a high or very high debt level? Doesn't it lack a bit of credibility? Isn't it like an healthcare company would have an obese guy as a CEO? 

Fuck, it happened with Valeant (Mike Pearson was probably 400 pounds with always a donut available in one of his pockets). 

That fucking stock market is such a fucking funny place.


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