Experian share price forecast: Does it score highly?
The global credit data company reported solid half-year results
From conducting risk assessments to helping businesses prevent fraud, Experian, which collects and stores information on over $1bn individuals and businesses across the world, supports financial institutions make suitable decisions about whether to lend to individuals or not.
With low interest rates, the gradual lifting of pandemic-related restrictions and flexible lending criteria currently in place, demand for credit scores and reports have been surging. Experian, whose main offering involves providing insurance providers, lenders and banks with financial information about retail customers, has, as evidenced by its impressive half year results published on Wednesday, enjoyed robust growth.
What are the half year results? And how do they impact an Experian stock forecast?
Let’s take a look.
Half year results
Revenue grew by 23% at actual exchange rates and 21% at constant exchange rate from $2480 to $3060.
Earnings before interest and tax came in at $806m during the 6 months ending on 30 September, up 25% at constant exchange rate compared to the same time last year.
Profit before tax stood at $654m compared to $458m this time last year, while operating profit increased 29% year-on-year to $702m.
The results reported an “outstanding” first half in Consumer Services, one of the multinational firm’s major offerings, with a growth in revenue of 27% compared to last year. Free consumer memberships grew by 26 million across Brazil, US and UK - the firm’s three principal markets - to 122 million.
Organic revenue growth in North America was 16%, 20% in Latin America, 15% in UK and Ireland, and 6% in EMEA/ Asia Pacific.
B2B organic revenue growth grew by 12% throughout all regions.
Demand for financial data has in key markets has surged as world opens up from the pandemic. The Anglo-Irish multinational signed over 60 contracts verification services in North America.
Experian, as a result of solid half year results, raised annual revenue outlook for the full year (ending in March 2022) to between 15%- 17% from previous projection of 13% to 15%. This is the third time Experian has raised projections this year.
In response to the results Brian Cassin, Chief Executive Officer, said “Consumer Services has seen standout growth, and our B2B businesses continue to perform very well. We expect progress to continue, and for the full year, we now expect organic revenue growth in the range of 11-13%, total revenue growth of 15-17% and strong EBIT margin accretion, all at constant exchange rates.”
“Our growth is being enabled by a successful innovation-led strategy which has financial inclusion at its heart. Our aim is to empower consumers and businesses globally, improving financial health for all by using our capabilities as a force for good to transform lives and power opportunities.”
While these results certainly indicate an optimistic future for the Experian stock price, however past performance can only ever be a partial contributing factor in creating an Experian stock price forecast.
Before we look at how analysts weigh in on the Experian share price forecast, let’s look at how the market responded.
Since going public on the London Stock Exchange in October 2006, Experian stock price has enjoyed a broadly favourable market response.
In 2010, the Experian stock price passed the £10.00 ($13.47) mark, before surging past the £20.00 ($26.95) mark in 2019.
In early 2020, the stock price experienced its first significant drop from £28.63 ($38.58) on 21 February 2020 to £20.36 ($27.43) on 20 March 2020.
The stock quickly rebounded, however, hitting £31.24 ($42.10) on 18 September 2020. Throughout late 2020 and early 2021, the price crashed again to £22.73 ($30.63) on 26 February 2021, before climbing back up to record highs throughout Spring and Summer 2021.
On 16 November, Experian stock price hit record highs of £35.12 ($47.33).
Despite the positive results, the Experian stock price has dropped over the course of the day. Opening at £34.65 ($46.69), stock price rose to £34.99 ($47.15) before dropping to £34.26 ($46.17). The current price stands at £34.32 ($46.25).
This could be due to the fact Experian stock prices are experiencing resistance after surging to record prices during its October rally.
In the past full year, Experian stock price has risen by 18.11% while in the last 6 months it has risen by 29.55%.
But what does the market response mean for the Experian stock price forecast?
Let’s take a look…
Out of 13 analysts polled, the most optimistic of the bunch estimate a 12-month price target of £37.49 ($50.55), an increase of 6.8% compared to current price. The low end for Experian stock comes in at £18.99 ($25.60), a decrease of 45.9%. The median estimate represents a 3.2% decrease from current price to £33.99 ($45.83).
From a consensus recommendation by the FT, 1 expert has put a buy recommendation, 11 analysts believe Experian will outperform the market, three advise a hold, one analyst believes it will underperform the market and zero analysts have put a sell rating.
On Monday Paul Sullivan, Barclays analyst reissued a buy rating on Experian, setting a price target of £37.50 ($50.57). He also forecast that Experian, for the fourth quarter of this year, will post earnings per share (EPS) of £0.00 ($0.00)
Experian stock forecast: the challenges
While there is plenty to suggest Experian's fortunes will continue to look bright, it is worth bearing in mind a couple of challenges.
Firstly, in the results, the global data firm cited potential future ongoing risk factors in the report, including changes to existing regulations, market volatility, tax policy uncertainty and the ongoing continued impact of COVID-19.
Furthermore, its important to note that Experian monetises from people's data. Such practices will no doubt continue to be scrutinised and potentially at some point in the future regulated against.
Last year, the company had run-ins with the Information Commissioner’s Office in the UK, with the regulator concluding that Experian had been “trading, enriching and enhancing people’s personal data without their knowledge”.
Millions of British consumers were likely affected by this “invisible” practice without their knowledge, according to the ICO, which was against data protection law. The regulator added:
“This processing resulted in products which were used by commercial organisations, political parties or charities to find new customers, identify the people most likely to be able to afford goods and services, and build profiles about people.”
It is worth noting that Experian wasn’t the only credit referencing agency that was involved in this practice – but the company was singled out because its efforts to improve compliance “did not go far enough”. In October 2020, EXPN was warned that it had nine months to turn things around or it could face a fine of £20m or up to four per cent of its annual worldwide turnover. Given this stood at $5.17bn in the 2020 fiscal year, that could result in an eye-watering penalty of up to $206m.
With impressive half-year results and an upgraded outlook for the full year, Experian certainly appears to be an attractive stock at the moment.
However, it is important to do your own research. With the stock currently at peak levels, potential governmental crack down on big data on the horizon and a volatile economic climate, there may be challenges for the company in the year ahead.
Experian stock may go up however it may also go down. As a result of the October rally, stock prices for Experian are already pretty high. This is evidenced by the fact that despite the positive half year results and upgraded outlook, the stock price went down over the course of today (17 November).
Investing is a highly personal endeavour. After completing extenstive research on the company, you may decide it is a good idea to invest in Experian stock.