Solid Business Model Aids TransUnion (TRU), High Debt Hurts
Strong business model and favorable socio-economic trends boost TransUnion (TRU) stock. However, high debt is a headwind.
TransUnion TRU is currently benefitting from attractive business model and favorable socio-economic trends.
Recently, the company reported second-quarter 2021 adjusted earnings per share of 96 cents that beat the consensus mark by 4.4% and increased 45.5% year over year. Total revenues of $774.2 million beat the consensus mark by 3.3% and increased 22% year over year on a reported basis.
Notably, the stock has gained 38% in the past year compared with 21.7% rise of the industry it belongs to.
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How is TransUnion Doing?
TransUnion has an attractive business model with highly recurring and diversified revenue streams, significant operating leverage, low capital requirements and stable cash flows. The inherent nature and significance of its solutions in customers’ decision-making endow it with high customer retention and revenue visibility.
As emerging market economies continue to develop and mature, TransUnion is well-positioned to gain from the associated favorable socio-economic trends. Increased risk of identity theft due to data breaches along with high consumer awareness about the importance and usage of their credit information are propelling the demand for TransUnion’s consumer solutions.
TransUnion has a debt-laden balance sheet. The company’s cash and cash equivalent of $526 million at the end of second-quarter 2021 was well below the total debt level of $3.34 billion. This underscores that the company doesn’t have enough cash to meet this debt burden. The cash level, nevertheless, can meet the short-term debt of $69 million.
Zacks Rank and Other Stocks to Consider
TransUnion currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors interested in the broader Zacks Business Services sector can also consider other top-ranked stocks like ManpowerGroup Inc. MAN, Equifax EFX and Genpact Limited G, each carrying a Zacks Rank #2 (Buy).
The long-term expected earnings per share (three to five years) growth rate for ManpowerGroup, Equifax and Genpact is pegged at 24.2%, 15.2% and 14.7%, respectively.
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