Equifax's uptrend has resumed

Posted Dec 7th 2009 11:20AM by Joseph Lazzaro
Filed under: Stocks to Buy

Equifax (EFX) has erased most of the concerns associated with its summer stock price dip, and that's one reason I'm reiterating my buy rating for the credit rating giant, first recommended on June 3, 2009, at a price of $27.06.

Equifax, one of three global providers of consumer and commercial credit information, commonly called credit reports, remains well-positioned to benefit from increased requests for credit reports, as the U.S. and global economic recoveries progress.

Further, the calculation here is that those projecting flattish revenue growth for EFX in 2010 are being a tad too conservative: assume the continued, modest recovery in the U.S. housing sector and one can see how EFX will register a nice increase in its mortgage application-related business. Meanwhile, international markets, particularly Latin America, remain largely untapped regions, with large upside potential.

To be sure with a P/E of 16, EFX is no longer cheap, but the price is still reasonable, given likely earnings increases. The First Call FY2009/FY2010 EPS estimates for EFX are $2.29 to $2.43. That FY2010 EPS estimate will likely prove to be low.

Technically, as argued in September, Equifax's summer dip to $25 following a dash to $30 from about $19 looks like a correction, as the uptrend has resumed, with EFX remaining above the key, 50-day moving average since September. It looks like institutional investors have been adding to their EFX positions for the better part of a year.

Stock Analysis: Equifax is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in EFX now, then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your EFX position before February 2010. Sell/stop loss if you were to buy shares in this company: $17.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: EFX, Equifax