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TransUnion (TRU) Hits 52-Week High on Growth Impetus

Shares of business services provider TransUnion TRU hit a new 52-week high of $31.66 on May 9, 2016, before closing the trading session a notch lower at $31.39 with a healthy year-to-date return of 12.9%.

TransUnion’s share price has been on a steady uptrend since Mar 2016. Despite its strong price appreciation, this Zacks Rank #2 (Buy) stock has enough potential to further drive up its price. The stock is currently trading at a forward P/E of 23.3x and has a long-term earnings growth expectation of 11.9%.

Growth Drivers

TransUnion serves a broad range of customers across multiple geographies and verticals, and boasts over 35 million customers. Of late, it has expanded its target market by establishing a foothold in high-potential growth markets like India, Philippines, Africa and certain regions in Latin America. It has also entered new verticals such as government and investigative services in the U.S. and is partnering with traditional and emerging providers in new verticals.

TransUnion recently scored a third successive beat as its first-quarter 2016 adjusted earnings (including stock-based compensation) of 30 cents per share surpassed the Zacks Consensus Estimate by a remarkable 20%. Robust top line growth, coupled with productivity improvement initiatives, drove the company’s profits.

Adjusted net income for the quarter came in at $58.2 million, almost doubling from the year-ago quarter’s tally of $29.6 million. Strong growth momentum across the segments, combined with new product growth initiatives, led to the impressive bottom line performance.

Revenues for the quarter increased roughly 15% year over year to $406 million, comfortably beating the Zacks Consensus Estimate of $380 million. On a constant currency basis, the top line rose 17.6% year over year, driven by double-digit growth across all three segments.

TransUnion has an attractive business model with highly recurring and diversified revenue streams, significant operating leverage, low capital requirements and strong and stable cash flows. Impressively, it deals with the 10 largest U.S. banks, the top 5 credit card issuers, the biggest 25 auto lenders and thousands of healthcare providers and federal, state and local government agencies. The company also keeps making significant investments to modernize its infrastructure and facilitate the seamless transition to the latest Big Data and analytics technologies. This enables TransUnion to expand its business and improve its cost structure. All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.

Stocks to Consider

Some other better-ranked stocks in the industry include The Dun & Bradstreet Corp. DNB, Navigant Consulting Inc. NCI and Accenture plc ACN, each carrying the same Zacks Rank as TransUnion.

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DUN &BRADST-NEW (DNB): Free Stock Analysis Report
ACCENTURE PLC (ACN): Free Stock Analysis Report
NAVIGANT CONSLT (NCI): Free Stock Analysis Report
TRANSUNION (TRU): Free Stock Analysis Report
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