Is Experian plc A Buy?


I reckon that information services leviathan Experian (LSE: EXPN) is geared for strong growth from this year onwards as global growth ratchets up a notch. The company is well placed to benefit from this, I believe, through continued growth in the West as well as expansion in promising emerging markets.

Everything's big in America

Experian explained in last month's interims that organic growth rates, on a constant currency basis, rose 7% in the third quarter. In particular, solid growth of 7% within North America -- a region responsible for almost half of total group turnover -- was pushed by an excellent performance within the firm's Credit Services arm, which posted double-digit growth.

Especially encouraging was that Experian's less mature Business Credit, Healthcare and Autos sub-divisions within Credit Services boasted an excellent performance, through both market share gains and new business wins, illustrating fresh opportunities for the company.

Moving up in lucrative Latin regions

The release also revealed the solid progress Experian is making in developing economies, and in particular South America. Growth in the region outperformed the company's other target geographies during October to December, with turnover rising 11% from the corresponding three months of 2011.

Although lending is tightening in Brazil, and a weaker economic backdrop caused growth to slow between July and September, I believe that the firm is well positioned to gain in the long term. A rising middle class across Latin America should underpin future demand for the company's credit services as spending power gallops higher.

Experian is extremely active in expanding operations across the continent, too -- it completed the acquisition of credit data provider Serasa of Brazil in November, and follows the purchase of Colombian credit services provider Computec the previous year.

Explosive earnings potential

I expect Experian's prime position in its global market can push earnings per share (EPS) higher in the medium term as the global economic recovery clicks through the gears.

An EPS growth rate of 4%, to 51.7p, is pencilled in by City analysts for the year ending March 2013. This forecast is predicted to leap 19% in 2014 to 61.4p, before rising an additional 11% the following year to 68.5p.

Experian does not come cheap, with a projected earnings multiple of 20.9 for March 2013 set to remain elevated at 17.6 and 15.8 for 2014 and 2015 respectively. But I believe the possibility for meaty earnings growth fully justifies the company's premium rating.

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