TransUnion (TRU – Free Report) stock has rallied 36.6%, outperforming the 18.4% and 26% growth of the industry it belongs to and the Zacks S&P 500 composite in the past year.
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TRU has an expected long-term (three to five years) EPS growth rate of 20.9%. The company’s earnings for 2024 and 2025 are anticipated to rise 16% and 16.5% year over year, respectively. Revenues are expected to increase 8.9% in 2024 and 7.7% in 2025.
Factors That Auger Well for TRU
TransUnion has been recognized for the third consecutive year as one of America’s Most Responsible Companies by Newsweek, highlighting its commitment to sustainability and responsible operations. The company’s focus on building trust between businesses and consumers helps people access opportunities for a better quality of life. With more than 50 years of experience as a credit reporting agency, TransUnion promotes responsible access to financial services and invests in technology to expand into areas like fraud and analytics. Integrity and high ethical standards are central to the company’s operations.
TransUnion’s analysis shows a decrease in suspected digital fraud during the 2024 holiday shopping season. Globally, fraud dropped from 6.0% in 2023 to 4.6%, and in the United States, it fell from 5.8% to 4.2%. Despite this decline, 64% of U.S. consumers remain concerned about digital fraud, highlighting ongoing challenges for retailers.
The company’s ability to reduce fraud risks enhances its reputation and may drive more business. However, the persistence of consumer concerns and evolving fraud tactics means TransUnion must continue innovating to stay competitive and meet customer needs.
TransUnion’s commitment to rewarding shareholders through dividends is commendable. The company has demonstrated a strong track record, paying $81.8 million in dividends in 2023, up from $77.8 million in 2022 and $61.8 million in 2021. In the third quarter of 2024, TransUnion declared a cash dividend of 10.5 cents per share. These consistent dividend initiatives significantly boost investor confidence and reflect the company’s dedication to returning value to its shareholders.
TransUnion’s current ratio (a measure of liquidity) stood at 1.68 at the end of the third quarter of 2024, up from 1.66 in the previous quarter and 1.54 in the same quarter last year. A current ratio above 1 typically indicates that a company is well-positioned to meet its short-term obligations.
TRU: Key Risks to Watch
The moderation in credit card balances may reflect a more stable financial environment, but it could also indicate that consumers are relying less on credit cards for spending. If credit growth remains sluggish, TransUnion could see slower growth in its data and insights business, which depends on an expanding pool of consumer credit data.
Moreover, a rise in serious delinquencies, particularly among non-prime borrowers, could raise concerns for lenders and affect their willingness to extend credit. TransUnion must monitor these trends closely and adjust its fraud detection and credit risk solutions accordingly.
The surge in operating expenses imposes a significant challenge to TransUnion’s bottom line. In the third quarter of 2024, total operating expenses increased by 17.4% compared to the previous year’s $791 million, excluding goodwill impairment costs. This upward trend has been consistent, with operating expenses growing by 14% in 2021, 34% in 2022 and 20% in 2023. These ongoing cost increases could affect the company’s bottom line in the future.
TRU’s Zacks Rank and Stocks to Consider
TRU currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks from the broader Zacks Business Services sector are Charles River Associates (CRAI – Free Report) and Booz Allen Hamilton (BAH – Free Report) .
Charles River Associates currently carries a Zacks Rank of 2 (Buy). It has a long-term earnings growth expectation of 16%.
CRAI delivered a trailing four-quarter earnings surprise of 31%, on average. Shares of CRAI have risen 84.8% in the past year.
Booz Allen Hamilton has a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
BAH has a long-term earnings growth expectation of 13.3%. It delivered a trailing four-quarter earnings surprise of 11.7%, on average. Shares of BAH have risen 2.9% in the past year.
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