Experian Shares - Are They Overvalued?

After moving -2.55 Friday, Experian is now trading at a price of $37.69. In contrast, the S&P 500 index moved -1.1%. Read below for a basic value analysis of Experian.

Experian shares moved -8.8% over the last 52 weeks, with a high of $41.85 and a low of $27.58. During this time, the stock lagged the S&P 500 index by -1.1%. As of January 2022, the company's 50-day average price is $35.4. Experian plc, together with its subsidiaries, operates as a technology company, primarily in the credit rating industry. The company has 21,700 full time employees and is based in Dublin, Ireland. It has returned a 1.4% dividend yield over the last 12 months.

Operating Margins Consistently Higher Than the 9.03% Industry Average:

2019-03-31 2020-03-31 2021-03-31 2022-03-31
Revenue (MM) $4,861 $5,179 $5,372 $6,288
Revenue Growth n/a 6.54% 3.73% 17.05%
Gross Margins 49.7% 49.3% 46.8% 47.3%
Gross Margins Growth n/a -0.8% -5.07% 1.07%
Operating Margins 23.8% 22.9% 19.8% 21.8%
Operating Margins Growth n/a -3.78% -13.54% 10.1%
Earnings Per Share $0.76 $0.74 $0.88 $1.26
EPS Growth n/a -2.63% 18.92% 43.18%
Free Cash Flow (MM) $802 $769 $1,066 $1,289
FCF Growth n/a -4.11% 38.62% 20.92%
Capital Expenditures (MM) -$439 -$487 -$422 -$508
Net Debt / EBITDA 1.84 2.28 2.39 1.88

Experian Is Overvalued:

Experian has a trailing twelve month P/E ratio of 36.2 compared to the Industrials sector's average of 21.46. The company doesn't issue forward earnings guidance, and the mean growth rate of its last 4 years of reported EPS is 19.67%. On this basis, the company's PEG ratio is 1.84. But we cannot assume that Experian's impressive past EPS growth rate is sustainable. It is more prudent to calculate the company's PEG ratio with the expected 5-year EPS growth rate of the entire market, which is 13.05%. This more cautious approach gives us a PEG ratio of 2.78, which suggests that the company's shares are overvalued.

Experian's P/B ratio is 9.6 compared to its sector average of 3.7. The company is likely overvalued in terms of its net asset value. The company's shares are currently trading 321.3% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * 4-year average EPS * book value per share) = √(22.5 * 0.91 * 3.908) = $8.95

Most of the Market Indicators on Experian Are Negative:

2 analysts are following Experian and have set target prices ranging from $36 to $44 per share. On average, they have given the company a rating of strong buy. At the current price of $37.69, EXPGY is trading -5.78% away from its average analyst target price of $40 per share, implying an analyst consensus of some upside potential for the stock.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.