Equifax EFX is benefiting from its new EFX Cloud Data Fabric, and the innovation of its products using AI and ML. However, low liquidity and seasonality cast a shadow over its performance.

The company’s revenues for 2024 and 2025 are expected to increase 8.7% and 11.6%, respectively, on a year-over-year basis. Earnings are anticipated to rise 9.2% in 2024 and 29.4% in 2025. The company has an expected long-term (three to five years) earnings-per-share growth rate of 14.6%.

Factors That Auger Well for EFX

In the third quarter of 2024, Equifax made ample progress in its international technology transformation activities, with Canada completing the migration of all customers from their consumer and commercial credit exchanges onto the new EFX Cloud Data Fabric. It was a huge success for the international team regarding the cloud migration in Argentina, Chile and the Dominican Republic, which was completed at the beginning of the year. Equifax expects such efforts to continue in 2025 and 2026, resulting in additional cloud savings as the migrations are completed. EFX’s aim to build a new Equifax Cloud to leverage its new cloud capability is anticipated to drive its top and bottom lines.

The company is using AI and ML to develop products in its single data fabric, and build higher-performing model scores and products for its customers. Equifax is also propelling the pace of developing the latest EFX models and scores, leveraging its advanced AI and ML capabilities in domains like identity and fraud, and consumer loan affordability. Overall, the technologies discussed above are driving higher performance and predictability for EFX.

Acquisitions made by Equifax supplement its core business. The company has leveraged acquisitions to provide broad insight into consumer performance, financial status, capabilities of customers and market opportunities.

In 2023, Equifax acquired Boa Vista Servicos, which strengthened its presence in Brazil and enabled customers of the acquired company to leverage the expansive international capabilities of EFX. Midigator LLC and Efficient Hire were acquired by the company in 2022. Midigator expanded Equifax’s footprint around the globe in digital identity and fraud prevention solutions, whereas Efficient Hire expanded its portfolio of employer, HR-focused solutions and enhanced its ability to assist clients in managing their hiring and employment needs.

Risks Faced by Equifax

Equifax's current ratio at the end of third-quarter 2024 was 0.88, lower than the industry average of 1.15. Despite an 11.4% rise from the preceding quarter, a current ratio of less than 1 indicates that the company may have problems paying off its short-term obligations.

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Per Equifax, its Financial Marketing Services business usually witnesses lower revenues from financial wealth asset products and data management services in the first, second and third quarters than the fourth quarter of a year. Seasonality as such makes it tough to predict EFX’s prospects. Thus, we believe that year-over-year comparisons are more vital for this company.

Zacks Rank & Stocks to Consider

Equifax currently carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks from the broader Zacks Business Services sector are AppLovin APP & Qifu Technology, Inc. QFIN.

AppLovin flaunts a Zacks Rank of 1 (Strong Buy) at present. It has a long-term earnings growth expectation of 20%. You can see the complete list of today’s Zacks #1 Rank stocks here.

APP delivered a trailing four-quarter earnings surprise of 26.2%, on average.

Qifu Technology sports a Zacks Rank of 1 at present. It has a long-term earnings growth expectation of 14.5%.

QFIN delivered a trailing four-quarter earnings surprise of 8.6%, on average.

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