Baird Initiates TransUnion At Outperform Citing Best-In-Class Organic Growth

Baird initiated coverage of TransUnion TRU on Wednesday, with an Outperform rating and $36 price target. Analysts Jeffrey P. Meuler and Nick Nikitas assured that the company has recently posted best-in-class organic, board-based growth, in an appealing industry that is currently benefitting from a strong consumer credit backdrop, the focus that banks are putting on risk management and cost-effective compliance, and a “secular trend towards increased usage of information in decision making.”

As per the note, the company seems to offer numerous drivers for sustained growth, but has, however, provided what looks like conservative guidance. Moreover, TransUnion’s economic model is alluring, the experts added. The firm offers attractive ROIC, fairly wide moats, “largely recurring revenue, high margin, [and] secular growth characteristics.”

The analysts highlighted a few other elements that support their bullish stance:

• TransUnion seems to have an early-mover advantage in real-time trended data, which could become the new paradigm.
• The company is seen as a top example of “a next-generation data asset-centric information solutions company that marries data assets, analytics capability, and technology, but with a greater company delivered-software component.”
• The firm has established a strong position in the faster-growing healthcare and insurance verticals, as well as in rapidly-expanding international markets including South Africa, Hong Kong, and India.
• The business boasts substantially robust consumer direct performance, in part on the back of a first-mover partnership with Credit Karma.
• Organic growth rates are among the best in the industry.
• A tech "re-platforming," investment and other operational changes have led to a remarkable margin inflection – guidance implies a 200bps growth in 2016.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.