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Stock of the Week: Equifax

Put the breach in the back mirror.

Andrew Willis 11 April, 2022 | 4:48AM
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Andrew Willis: Five years ago, Equifax suffered a well-publicized data breach – and we’re not bringing that up to throw salt in the wound. Rather, how this credit bureau has moved on should be of interest to investors.

To help put the episode behind it, Equifax invested more than a quarter-billion in cybersecurity, but also it sought to solidify and grow its workforce solutions segment. These are services like income verification for mortgages, auto, credit cards and governments services. And they now make up the largest segment of the business.

And business is good. After a banner year last year with revenue up 19%, equity analyst Rajiv Bhatia sees a compound annual growth rate of 9% over the next five years. But the best part may be the economic moat here. Competitors will find it incredibly difficult to replicate the 535 million employment records at Equifax, up from 255 in 2014. And even if they did, what would they do with all that information?

Since data at credit bureaus is based on voluntary reporting from financial institutions, it’s hard for competitors to come along and convince banks to share consumer information. So if you’re looking for a tech stock on a discount with the uncertainty rating of a bank, this might be a good bet if you can look beyond the breach.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Equifax Inc172.18 USD3.04Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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