Best UK share? I think this FTSE 100 firm is in the running

David Barnes asks whether this FTSE 100 data king is a contender for the crown of the best UK share or has it become a little too expensive?

| 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.

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.

When the stock market crashes like it did in March, I tend to double-down on my research before buying a share. The question I ask is: if I could only buy one company for the rest of my life, what do I consider to be the best UK share?

The qualities that this ‘best UK share’ should possess will probably depend on your stage in life, risk tolerance and investing style. But I look for a share that is resilient in a market downturn and offers long-term revenue growth in an expanding sector of the market.

A contender for the best UK share crown?

Mathematician Clive Humby is credited with coining the phrase ‘data is the new oil’ in 2006. Perhaps a good illustration of this can be found by expanding the Experian (LSE: EXPN) share chart to a 10-year view. The shares rarely come cheaply, and a dip like the one seen in March is exceptional.

Readers will probably know Experian for its credit checking service. But Experian is a big data company providing decision analytics and marketing solutions to both businesses and individuals. Revenues have been ticking upwards for several years growing to $5,179m at the end of 2019.

It has a dominant UK market position and is one of the big three credit agencies globally. The sheer size and volume of data means that this is not a market that competitors can easily enter, creating an economic moat for Experian. Add a well-covered, but modest, dividend of 1.3% to the mix and there’s a lot to suggest Experian is one of the best UK shares.

How is Experian trading this year?

In a second-quarter update, it announced that underlying revenues declined 2%. UK & Ireland revenues fell 15% as tighter credit and lending policies and the collapse of the car sales market hit its core credit division. However, growth in North America and Brazil offset this fall.

The credit division is inherently cyclical with downturns in the economy squeezing credit and lending. But big data to drive decisions is in huge demand and Experian is a key player.

The coronavirus pandemic has changed the way we live. More people are now working from home. It has advanced the transition to online shopping. It has changed the way we spend our money. But these changes require huge data analysis. That should keep the tills ringing for Experian for many years to come.

As data is used by more and more industries to make decisions, the opportunities for Experian continue to expand. This is illustrated by the success of its Latin America market that accounted for 16% of profits last year.

Experian ticks a lot of the boxes but is it the best UK share right now? For me, it is a bit too expensive to hold that title. A P/E (price to earnings) ratio of 34 gives little margin for error if an earnings targets is missed. It also already prices in a lot of future growth.

I already own shares in Experian. But I’ll be waiting for another rare market pullback before investing any more money.

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.

David Barnes owns shares in Experian. The Motley Fool UK has recommended Experian. 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

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

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

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »