This FTSE 100 stock could be about to hit an all-time high! Should I buy?

Paul Summers takes a closer look at the latest earnings update from what he considers to be a quality FTSE 100 (INDEXFTSE:UKX) growth stock.

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The share price of FTSE 100 stock and credit checker Experian (LSE: EXPN) was in fine form this morning. In fact, it’s now getting very close to setting a fresh all-time high. What’s behind this momentum and is it too late to buy in?

FTSE 100 top riser

Answering the first question isn’t all that difficult. Earlier today, the self-styled ‘global information services company’ released an encouraging update on trading.

Thanks to a quicker-than-expected recovery from the pandemic, total revenue grew 28% over the three months to the end of June once foreign currency movements were stripped out.  

Although the FTSE 100 firm did well in all regions, this was particularly evident in Europe, the Middle East, and Africa/Asia Pacific. Collectively, total revenue jumped 61% here. That said, it’s important to bear in mind that these markets were hit hard over the same period last year so a big number wasn’t a complete surprise. Moreover, this region still contributes a relatively small proportion to Experian’s total revenue. 

Elsewhere, more established markets, such as the US, were also performing well. Overall revenue growth of 26% was recorded across the pond following a “significant uplift” in its credit comparison marketplace. It would seem many consumers are wanting to take advantage of credit card companies becoming a little more flexible with their lending criteria. In line with the huge demand seen for cars recently, the company also said that its automotive insurance comparison marketplace was “expanding rapidly“.

In the UK, Experian said that it “returned firmly to growth” following its transformation programme.  

So, would I buy this growth stock today?

I think there could be reasons both for me to buy and to not buy the FTSE 100 stock today.

Reasons to make me think twice include the definitely-not-cheap valuation. Before markets opened this morning, Experian was trading at 31 times forecast earnings. This certainly doesn’t mean the shares won’t climb higher from here. However, it does suggest to me that a lot of good news is already reflected in the price. The risk here is that Experian disappoints at some point down the line and leaves my holding ‘underwater’.

Even if this doesn’t happen, some investors may choose to recycle profits made over the last 18 months or so into stocks offering more value. This could conceivably have an impact on the share price for a while. 

On the other hand, Experian’s outlook continues to be promising. Following today’s numbers, the company announced that it now expects revenue to grow between 13% and 15% in this financial year. Organic growth — that generated internally rather than through acquiring other businesses — is likely to come in between 9% and 11%. Couple this with consistently high profit margins and there’s definitely still reasons for me to be bullish on this FTSE 100 stock.

Bottom line

There’s no doubt in my mind that Experian is a high-quality company. It’s also one I think I could comfortably hold for years within my own portfolio. So, on balance, I’d be more inclined than not to buy this stock today. This is even though the price may soon hit a new record high. 

Paraphrasing star UK fund manager Terry Smith, it’s what companies do over the years that really has an impact on investor returns, not market timing. Sometimes, I think it’s wise just to pay up. 

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.

Paul Summers has no position in any of the shares mentioned. 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.

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