September 13, 2011

September 13, 2011 

Volume XXXVII, Issue VII & VIII 

    - 25 - 

Equifax Inc.

 

(NYSE: EFX) 

Dow Jones Indus:   11,105.85 

 

S&P 500:  

1,172.87 

 

Russell 2000:  

691.74 

Trigger: No   

Index Component:  S&P 500 

Type of Situation: Consumer Franchise, Business Value 

 

Price: $ 

31.01 

Total Shares Outstanding (MM): 

 

122.8 

Fully Diluted (MM) (% Increase): 

 

124.6 (1.5%) 

Average Daily Volume (MM): 

 

1.1 

Market Cap (MM): 

$  3,866 

Enterprise Value (MM): 

$  4,739 

Percentage Closely Held:  Officers / Directors 4.6% 

52-Week High/Low: 

$  39.81/28.79 

5-Year High/Low: 

$  46.26/19.79 

Trailing Twelve Months 

 

 

Price/Earnings:  

17.6x 

Price/Stated Book Value: 

 

 2.1x 

Long-Term Debt (MM): 

$  982 

Implied Upside to Estimate of  

Intrinsic Value: 

 

41% 

Dividend:  

 

 

$0.64 

          Payout: 

 

37% 

          Yield: 

 

2.1% 

Revenue Per Share: 

 

 

TTM*: $ 

15.37 

2010: $ 

14.70 

2009: $ 

13.42 

2008: $ 

13.91 

 

Earnings Per Share: 

 

 

TTM: $ 

1.73 

2010: $ 

1.86 

2009: $ 

1.70 

2008: $ 

1.91 

Fiscal Year Ends: 

Company Address: 

 

Telephone: 

Chairman/CEO: 

December 31 

1550 Peachtree Street, N.W. 

Atlanta, GA 

[phone] 

Richard F. Smith 

Clients of Boyar Asset Management, Inc. do not own shares of Equifax, 

Inc. common stock.  

Analysts employed by Boyar’s Intrinsic Value Research LLC do not own 

shares of Equifax, Inc. common stock.

 

 

 

 

Introduction 

Equifax (“EFX” or “the Company”) is a leading 

provider of information solutions, employment and 

income verifications and human resources business 

processing outsourcing. During 2010, nearly 90% of the 

Company’s revenues were derived from services 

provided to businesses including consumer and 

business credit intelligence, credit portfolio 

management, decisioning technology, marketing tools 

and HR related services. Equifax leverages its large 

commercial and consumer databases, advanced 

analytics and proprietary technology to enable its 

customers to make better decisions and therefore help 

them grow profitably.  

Products marketed to individual consumers 

represented 10% of the Company’s 2010 revenues. 

The Company’s direct to consumer products allow 

individuals to make financial decisions, monitor their 

credit and credit score, and protect their identity. These 

products are sold on either a transaction or subscription 

basis and are delivered to customers electronically via 

the Internet. 

In our view, the Company operates an 

extremely attractive business model characterized by 

repeatable revenues streams, high barriers to entry, 

minimal capital requirements and high margins thanks 

to significant operating leverage. In addition, the 

competitive environment is extremely favorable as there 

are only two other large scale global competitors in the 

consumer credit and information management industry.  

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Equifax Inc. 

 

 - 26 - 

Equifax’s results have been negatively impacted by consumer deleveraging and tighter bank lending 

standards in response to the 2008/2009 credit crisis. These factors have pressured Equifax’s U.S Consumer 

Information Services (USCIS) business segment (40% of 2010 revenue; 63% of operating profit) the largest of 

the Company’s five operating segments. Revenues in the segment were 3% lower in 2010 vs. 2008 while 

operating margins have contracted by 260 basis points over that same time period. We believe the headwinds 

associated with the challenging economic environment will soon pivot to a tailwind given our view of an 

upcoming housing recovery (see our Summer 2011 introduction “Stocks set for a lift from a housing recovery”). 

A housing recovery bodes particularly well for Equifax given its direct mortgage exposure (15% in 2010) and 

implication for job growth, which should translate into increased consumer credit demand. Further, institutions 

are demanding more advanced analytics about consumers’ ability to pay in response to the recent downturn, 

which should increase demand for the Company’s services.  

While a housing recovery will likely provide a nice boost for Equifax, we believe that there are a 

multiple number of growth drivers that could favorably impact future results. Among the Company’s promising 

growth opportunities include strong new product development (137 new products introduced over the past 

2 years), recent investments/acquisitions in unique data assets and the growing demand for credit and risk 

information outside of the traditional finance/mortgage industries. Further, the Company has exposure to a 

number of high growth emerging markets including Russia, India and South America. The middle class 

population is exploding in these regions and the use of financing by consumers in these countries for property 

and vehicle purchases is expected to increase significantly. 

The significant operating leverage inherent in the Company’s database business model enables 

Equifax to generate an enormous amount of free cash flow. While the Company’s capital allocation has 

balanced share repurchases ($378 million since 2008), debt reduction ($238 million decrease), and 

acquisitions ($337 million since 2008) since the 2008/2009 credit crisis, we believe that a disproportionate 

amount of free cash flow going forward will be deployed for share repurchases. It should be noted that the 

Company’s leverage (debt/EBITDA) has declined meaningfully over the last 3 years and now stands at 1.6x 

down from 2.3x at the end of 2007. Further, we believe share repurchases represent an excellent use of capital 

with the shares trading at just 6.6x our 2012E EBITDA.  

At current levels, Equifax shares trade 22% below their 52 week high and are little changed over the 

past 6 years. In our view, the Company’s current valuation is inconsistent with the Company’s attractive 

business model (EBITDA margins ~32%) and strong growth prospects. Reinforcing our view of Equifax’s 

outlook and business prospects is the Company’s recent decision to boost its quarterly dividend by a whopping 

four fold to $0.16 a share from $0.04 a share (current yield: 2.1%). Applying a 9.0x multiple (on par with the 

8.5x-9.0x multiple paid by Madison Dearborn in 2010 to acquire a 51% stake in peer TransUnion from the 

Pritzker Family) to our projection of the Company’s 2012E EBITDA, we estimate the Company’s intrinsic value 

to be $44 a share, representing 41% upside from current levels.  

Business Overview  

Equifax manages its operations through five reportable segments. The following provides a summary 

of the annual operating results by segment over the past three years.  

Operating Revenues Operating 

Income 

 

2008 2009 2010 

6 Mos. 

2010 

6 Mos. 

2011 

 

2008 2009 2010 

6 Mos. 

2010 

6 Mos. 

2011 

U.S. Consumer  

   Information Services 

$768.7 

$712.2  $743.0 $357.7 $375.0

U.S. Consumer  

   Information Services 

$298.9  $259.4 $269.8

$128.4 $132.5

International $505.7 

$438.6 

$482.8 $234.4 $258.0 International  $149.9 

$118.9 $119.4

$58.8

$64.0

TALX $305.1 

$346.4 

$395.6 $194.3 $195.7 TALX  $53.1 

$75.4

$92.1

$44.5

$42.5

North Am. Personal Solutions 

$162.6 

$149.0  $157.6

$80.0

$89.6 North Am. Personal Solutions 

$46.3 

$34.3

$44.6

$20.2

$25.2

North Am. Commercial Sol. $71.5 $69.8 $80.5

$37.3

$41.4 North Am. Commercial Sol. 

$13.6 

$15.1

$19.5

$8.1

$9.5

Total Operating Revenue:$1,813.6  $1,716.0 $1,859.5 $903.7 $959.7 General Corporate Expense ($122.8) ($121.3) ($115.4) ($49.9) ($50.0)

 

 

Total Operating Income: $439.0  $381.8 $430.0

$210.1 $223.7

 

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