After a trading update, does the Experian share price look good value for money?

The Experian share price pulled back after its trading update on 16 July. Our writer questions whether the company looks cheap, given its forecasts.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Experian (LSE:EXPN) share price is up 18.5% over 12 months, but it pulled back on 16 July after the company’s trading update seemingly didn’t impress investors.

This drop in the share price was also likely influenced by the news that COO Craig Boundy would be stepping down from his role.

Created with Highcharts 11.4.3Experian Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Growth to moderate

Experian provides consumer credit reporting, data analytics, and fraud prevention services, helping businesses and individuals manage financial data and protect against identity theft.

Should you invest £1,000 in Experian Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Experian Plc made the list?

See the 6 stocks

Many of us will be familiar with the company when applying for financing to buy a house or even a car. It’s technology is widely used by financial institutions to track credit.

Giving the improving economic environment, it’s perhaps unsurprisingly that Experian has reported a strong start to the year, with global revenue up 7% year-on-year for the three months ending 30 June.

The firm, driven by consumer services growth, saw its best performance in North America. Notably, its consumer services division grew 11%, with Latin America achieving 24% growth.

Despite a strong start to the year, Experian anticipates growth will slow to more normal levels in the coming quarters.

CEO Brian Cassin reaffirmed guidance for 6-8% organic revenue growth and margin accretion of 30-50 basis points for the year as a whole.

As noted above, the results were accompanied by the news Boundy would be leaving his COO role.

So is the stock cheap?

Experian’s quite expensive, trading around 32.2 times forward earnings. This could mean its priced for perfection, and investors were hoping for more from this trading update.

After all, there are very few stocks on the FTSE 100 trading with more expensive valuations than this, and that justifying this valuation is a challenge for many investors.

Moving forward, Experian’s price-to-earnings (P/E) ratio’s expected to fall to 29 times in 2026 and 25.5 times in 2027.

In turn, this leads to a price-to-earnings-to-growth ratio around 2.8. That’s certainly not something I’d get excited about.

However, investors are often willing to pay a premium for quality businesses. And with around £1.2bn of cash flow annually and with that figure set to improve, it’s certainly worth considering.

What do brokers say?

Brokerages remain fairly bullish on Experian. The stock currently has seven Buy ratings, five Outperform ratings, five Hold ratings, and just one Underperform rating.

The average share price target for the stock however, is just 6.5% above the current share price. Normally, I’d expect a larger discount for a UK-listed stock.

The bottom line

Experian’s a stock I had to sell when buying my house. And that’s a shame as it has pushed upwards since.

However, I don’t feel particularly tempted to get back in. It’s expensive relative to its growth potential. And while it’s a quality business, I feel there are better investment opportunities available.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has no positions in the companies mentioned. The Motley Fool UK has recommended Experian Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Want a comfortable retirement? Here’s how much you need in your SIPP

The SIPP is a great vehicle for confident investors to build their personal pension over time and eventually use that…

Read more »

Investing For Beginners

3 ways I try to spot cheap shares during a stock market crash

Jon Smith talks through his process of filtering for cheap shares at a time when simply buying anything isn't the…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

As share trading hits new records, here’s why I’m planning to keep buying UK shares!

Thinking like Warren Buffett and buying 'on the dip' can unlock significant long-term returns from UK shares. Here's why.

Read more »

Elevated view over city of London skyline
Investing Articles

UK stocks: a brilliant buying opportunity?

UK stocks have taken a battering in recent days. That can be disconcerting -- but our writer is taking a…

Read more »

Bronze bull and bear figurines
Dividend Shares

2 dividend shares that could provide some shelter from the market storm

Jon Smith points out a couple of dividend shares that have yields in excess of 5% -- and that have…

Read more »

Investing Articles

I’ve been snapping up shares in this 11.6% yielding FTSE 250 growth stock

As a trade war knocks a quarter of the value off this FTSE 250 asset manager in a few days,…

Read more »

Investing Articles

I asked ChatGPT which FTSE 100 stocks are screaming buys for Trump’s tariff war. Here’s what it said

As the trade war heats up and the sell-off in stocks resumes, Paul Summers is looking for great FTSE 100…

Read more »

Investing For Beginners

Analysts now expect up to 4 UK rate cuts this year! Here’s what it could mean for the FTSE 100 index

Jon Smith points to the rapidly shifting market expectations when it comes to UK interest rates and explains the impact…

Read more »