Through The Fly's Eyes: Equifax

from Joseph Lazzaro of Theflyonthewall.com





















Equifax: Credit Score Nation, Credit Score World

The dawn of the globalization era has witnessed dozens of new sectors of growth, due to the robust growth in emerging market economies in China, India, Eastern Europe and Russia, among other locales.

And one sector that is almost certain to benefit from this growth -- due to the accompanying expansion of the middle class -- is credit reporting/credit information, which is why investors who can tolerate moderate risk may want to consider investing in Equifax (EFX).

(Note: In a future article on The Fly, we'll examine in more detail the expanding universe of credit score and credit report functions.)

Equifax, which was down 10 cents to $41.40 in Tuesday afternoon trading, is one of the main providers of consumer and commercial credit information, the others being TransUnion and Experian. The three form a "credit-worthy troica" that calculates, arguably, the most important score/number for each U.S. citizen, after his/her Social Security number and benefit tabulation.

Credit scores from the three, or the "tri-merged" score, have long been used in mortgage decisions to help determine a candidate's credit worthiness and payment reliability, but in recent years employers have increasingly used them to evaluate a candidate's employment history, and other information that may help fill-out the profile of a job applicant.

More recently, a micro market has developed for the three credit agencies in identity theft protection.Further, Equifax is well-positioned to benefit from growth in the above business lines. In addition, EFX should be able to leverage its current presence in the U.K., Spain, Portugal, Brazil, Argentina, and Chile to establish a footprint in the embryonic markets of Eastern Europe and Latin America. Also, as noted credit scores are important barometers in the U.S., and there's evidence to suggest that as emerging markets develop, the scores are attaining that category of importance in these new economies, as well.

One operational concern moving forward: slowing growth from EFX's North American market, its most important. However, as the housing sector slowly recovers, so should this revenue stream. The Reuters Q2 consensus estimate for EFX is revenue $421.8M and EPS 54 cents.