On Thursday, Bernstein analysts lowered the stock rating for Experian Plc (LON:EXPN:LN) (OTC: EXPGY (OTC:EXPGY)), moving it from 'Market Perform' to 'Underperform'. Accompanying this downgrade, they also reduced the price target to GBP30.50 from the previous GBP41.00. The $38.69 billion market cap company, which according to InvestingPro data maintains a GOOD overall financial health score, faces scrutiny over its growth prospects and market challenges.
Bernstein's analysis indicates that the consensus estimates for Experian (OTC:EXPGF)'s future earnings may be overly optimistic. While InvestingPro data shows the company achieved 7.43% revenue growth in the last twelve months, analysts point to specific headwinds such as the difficult comparisons in breach revenues, a challenging environment in Brazil, and growth drivers that are increasingly similar to those of other credit agencies. These factors contribute to the firm's cautious stance on Experian's stock performance.
The revised expectations by Bernstein include a forecast of Experian's organic growth at 7.0% for the fiscal year 2026 and 7.5% for fiscal year 2027. These projections fall below the consensus estimates, which are at 8.9% and 9.7%, respectively, for the same periods. The analysts believe that these lower growth rates are more aligned with the reality facing the company, which currently trades at a PEG ratio of 2.32, indicating a premium valuation relative to its growth rate.
In their valuation of Experian's shares, Bernstein has applied a price-to-earnings (P/E) ratio of 21 times the fiscal year 2026 earnings, notably below the current P/E of 32.9x. According to InvestingPro's Fair Value analysis, the stock appears fairly valued at its current price of $42.58.
This assessment, along with 11 additional ProTips available to subscribers, suggests Bernstein's approach brings the valuation closer to the company's long-term median values, signaling a return to what the analysts consider a more sustainable and realistic pricing for the stock.
The downgrade and price target adjustment are based on a detailed analysis by Bernstein, which encapsulates the firm's expectations for Experian's financial performance and market position in the coming years.
The analysts have articulated their rationale, emphasizing that while Experian may face tough conditions, their estimates are grounded in a thorough evaluation of the company’s potential growth trajectory.
In other recent news, Experian Plc, a credit-reporting giant, has been the subject of recent analyst attention due to a series of promising developments.
RBC Capital Markets upgraded its rating for Experian from 'Sector Perform' to 'Outperform', citing expectations of accelerated revenue growth, promising prospects in the US B2B segment, and the company's ongoing progress in cloud migration. The firm also indicated a positive outlook on Experian's future performance, setting a new price target at £42.00.
Experian has demonstrated solid performance with a 7.4% revenue growth in the last twelve months and a 'GOOD' overall financial health score, particularly in profitability. The company's operations in Brazil are expected to see accelerated growth, and new contracts in the B2B sector are anticipated to contribute to this growth.
Morgan Stanley (NYSE:MS) also reiterated its Overweight rating on Experian, maintaining a steady price target of GBP41.50. The company's organic growth of 7% aligns with the consensus estimate and falls within the full-year guidance of 6-8%. The company's revenue growth from ongoing activities showed an increase of 7% at constant exchange rates and 6% at actual rates.
Experian's operating profit for the period reached $1,011 million, marking an increase of over 8% year-over-year. The resulting EBIT margin stood at 28.%, showing an improvement of 60 basis points year-over-year at constant currency. The company's earnings per share (EPS) grew by 8% compared to the previous year. These are all recent developments that investors should take into consideration.
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