Intrinsic value of Equifax, Inc. - EFX

Previous Close

$125.70

  Intrinsic Value

$78.70

stock screener

  Rating & Target

sell

-37%

Previous close

$125.70

 
Intrinsic value

$78.70

 
Up/down potential

-37%

 
Rating

sell

We calculate the intrinsic value of EFX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 15.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,480
  3,560
  3,652
  3,755
  3,868
  3,993
  4,129
  4,276
  4,435
  4,605
  4,787
  4,982
  5,188
  5,408
  5,642
  5,889
  6,151
  6,427
  6,720
  7,029
  7,354
  7,698
  8,060
  8,442
  8,844
  9,267
  9,712
  10,181
  10,674
  11,192
Variable operating expenses, $m
  2,610
  2,658
  2,712
  2,774
  2,842
  2,916
  2,997
  3,085
  3,180
  3,282
  2,858
  2,974
  3,097
  3,229
  3,368
  3,515
  3,672
  3,837
  4,011
  4,196
  4,390
  4,595
  4,812
  5,039
  5,279
  5,532
  5,798
  6,077
  6,372
  6,681
Fixed operating expenses, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Total operating expenses, $m
  2,609
  2,657
  2,711
  2,773
  2,841
  2,915
  2,996
  3,084
  3,179
  3,281
  2,857
  2,973
  3,096
  3,228
  3,367
  3,514
  3,671
  3,836
  4,009
  4,194
  4,388
  4,593
  4,810
  5,037
  5,277
  5,530
  5,796
  6,075
  6,370
  6,679
Operating income, $m
  871
  904
  940
  982
  1,028
  1,078
  1,133
  1,192
  1,256
  1,325
  1,931
  2,009
  2,092
  2,181
  2,275
  2,375
  2,480
  2,592
  2,710
  2,834
  2,966
  3,104
  3,250
  3,404
  3,566
  3,737
  3,916
  4,105
  4,304
  4,513
EBITDA, $m
  1,582
  1,619
  1,660
  1,707
  1,759
  1,815
  1,877
  1,944
  2,016
  2,094
  2,176
  2,265
  2,359
  2,459
  2,565
  2,677
  2,796
  2,922
  3,055
  3,195
  3,343
  3,499
  3,664
  3,837
  4,020
  4,212
  4,414
  4,627
  4,851
  5,087
Interest expense (income), $m
  85
  142
  147
  152
  158
  164
  172
  180
  188
  198
  208
  219
  231
  243
  256
  270
  285
  301
  318
  336
  354
  374
  395
  417
  440
  465
  491
  518
  546
  576
  608
Earnings before tax, $m
  729
  757
  788
  824
  863
  906
  953
  1,004
  1,058
  1,117
  1,712
  1,778
  1,849
  1,925
  2,005
  2,090
  2,179
  2,274
  2,374
  2,480
  2,591
  2,709
  2,833
  2,964
  3,101
  3,246
  3,398
  3,559
  3,728
  3,905
Tax expense, $m
  197
  204
  213
  222
  233
  245
  257
  271
  286
  302
  462
  480
  499
  520
  541
  564
  588
  614
  641
  670
  700
  731
  765
  800
  837
  876
  918
  961
  1,006
  1,054
Net income, $m
  532
  552
  576
  602
  630
  662
  696
  733
  773
  815
  1,250
  1,298
  1,350
  1,405
  1,463
  1,525
  1,591
  1,660
  1,733
  1,810
  1,892
  1,978
  2,068
  2,163
  2,264
  2,370
  2,481
  2,598
  2,721
  2,851

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  7,296
  7,464
  7,656
  7,871
  8,110
  8,372
  8,657
  8,965
  9,298
  9,655
  10,036
  10,444
  10,877
  11,338
  11,827
  12,346
  12,894
  13,475
  14,088
  14,735
  15,418
  16,138
  16,897
  17,697
  18,540
  19,427
  20,361
  21,343
  22,377
  23,464
Adjusted assets (=assets-cash), $m
  7,296
  7,464
  7,656
  7,871
  8,110
  8,372
  8,657
  8,965
  9,298
  9,655
  10,036
  10,444
  10,877
  11,338
  11,827
  12,346
  12,894
  13,475
  14,088
  14,735
  15,418
  16,138
  16,897
  17,697
  18,540
  19,427
  20,361
  21,343
  22,377
  23,464
Revenue / Adjusted assets
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
Average production assets, $m
  3,445
  3,525
  3,615
  3,717
  3,830
  3,953
  4,088
  4,234
  4,391
  4,559
  4,739
  4,932
  5,137
  5,354
  5,585
  5,830
  6,089
  6,363
  6,653
  6,958
  7,281
  7,621
  7,979
  8,357
  8,755
  9,174
  9,615
  10,079
  10,567
  11,080
Working capital, $m
  -146
  -150
  -153
  -158
  -162
  -168
  -173
  -180
  -186
  -193
  -201
  -209
  -218
  -227
  -237
  -247
  -258
  -270
  -282
  -295
  -309
  -323
  -339
  -355
  -371
  -389
  -408
  -428
  -448
  -470
Total debt, $m
  2,720
  2,815
  2,923
  3,045
  3,180
  3,328
  3,490
  3,664
  3,853
  4,055
  4,271
  4,501
  4,747
  5,008
  5,284
  5,578
  5,888
  6,217
  6,564
  6,930
  7,317
  7,724
  8,154
  8,607
  9,084
  9,586
  10,114
  10,670
  11,255
  11,871
Total liabilities, $m
  4,130
  4,225
  4,333
  4,455
  4,590
  4,738
  4,900
  5,074
  5,263
  5,464
  5,681
  5,911
  6,157
  6,417
  6,694
  6,988
  7,298
  7,627
  7,974
  8,340
  8,727
  9,134
  9,564
  10,017
  10,494
  10,996
  11,524
  12,080
  12,665
  13,281
Total equity, $m
  3,167
  3,239
  3,323
  3,416
  3,520
  3,633
  3,757
  3,891
  4,035
  4,190
  4,356
  4,533
  4,721
  4,921
  5,133
  5,358
  5,596
  5,848
  6,114
  6,395
  6,691
  7,004
  7,333
  7,681
  8,046
  8,431
  8,837
  9,263
  9,712
  10,183
Total liabilities and equity, $m
  7,297
  7,464
  7,656
  7,871
  8,110
  8,371
  8,657
  8,965
  9,298
  9,654
  10,037
  10,444
  10,878
  11,338
  11,827
  12,346
  12,894
  13,475
  14,088
  14,735
  15,418
  16,138
  16,897
  17,698
  18,540
  19,427
  20,361
  21,343
  22,377
  23,464
Debt-to-equity ratio
  0.860
  0.870
  0.880
  0.890
  0.900
  0.920
  0.930
  0.940
  0.950
  0.970
  0.980
  0.990
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.140
  1.150
  1.160
  1.170
Adjusted equity ratio
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  532
  552
  576
  602
  630
  662
  696
  733
  773
  815
  1,250
  1,298
  1,350
  1,405
  1,463
  1,525
  1,591
  1,660
  1,733
  1,810
  1,892
  1,978
  2,068
  2,163
  2,264
  2,370
  2,481
  2,598
  2,721
  2,851
Depreciation, amort., depletion, $m
  711
  715
  720
  725
  731
  737
  744
  752
  760
  769
  246
  256
  266
  277
  289
  302
  315
  330
  345
  361
  377
  395
  413
  433
  454
  475
  498
  522
  548
  574
Funds from operations, $m
  1,243
  1,267
  1,295
  1,327
  1,361
  1,399
  1,440
  1,485
  1,533
  1,584
  1,495
  1,554
  1,616
  1,683
  1,753
  1,827
  1,906
  1,990
  2,078
  2,171
  2,269
  2,372
  2,482
  2,596
  2,718
  2,845
  2,979
  3,120
  3,269
  3,425
Change in working capital, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Cash from operations, $m
  1,246
  1,271
  1,299
  1,331
  1,366
  1,404
  1,446
  1,491
  1,539
  1,591
  1,503
  1,562
  1,625
  1,692
  1,763
  1,838
  1,917
  2,001
  2,090
  2,184
  2,283
  2,387
  2,497
  2,613
  2,734
  2,863
  2,998
  3,140
  3,289
  3,447
Maintenance CAPEX, $m
  -175
  -179
  -183
  -187
  -193
  -198
  -205
  -212
  -219
  -227
  -236
  -246
  -256
  -266
  -277
  -289
  -302
  -315
  -330
  -345
  -361
  -377
  -395
  -413
  -433
  -454
  -475
  -498
  -522
  -548
New CAPEX, $m
  -67
  -79
  -91
  -102
  -113
  -124
  -135
  -146
  -157
  -169
  -180
  -192
  -205
  -218
  -231
  -245
  -259
  -274
  -290
  -306
  -323
  -340
  -359
  -378
  -398
  -419
  -441
  -464
  -488
  -513
Cash from investing activities, $m
  -242
  -258
  -274
  -289
  -306
  -322
  -340
  -358
  -376
  -396
  -416
  -438
  -461
  -484
  -508
  -534
  -561
  -589
  -620
  -651
  -684
  -717
  -754
  -791
  -831
  -873
  -916
  -962
  -1,010
  -1,061
Free cash flow, $m
  1,004
  1,013
  1,026
  1,042
  1,061
  1,082
  1,106
  1,133
  1,163
  1,195
  1,086
  1,124
  1,165
  1,208
  1,254
  1,304
  1,356
  1,412
  1,471
  1,533
  1,600
  1,670
  1,743
  1,821
  1,904
  1,990
  2,082
  2,178
  2,279
  2,386
Issuance/(repayment) of debt, $m
  84
  95
  109
  122
  135
  148
  161
  175
  188
  202
  216
  231
  245
  261
  277
  293
  311
  328
  347
  366
  387
  408
  430
  453
  477
  502
  528
  556
  585
  615
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  84
  95
  109
  122
  135
  148
  161
  175
  188
  202
  216
  231
  245
  261
  277
  293
  311
  328
  347
  366
  387
  408
  430
  453
  477
  502
  528
  556
  585
  615
Total cash flow (excl. dividends), $m
  1,088
  1,108
  1,135
  1,164
  1,196
  1,230
  1,268
  1,308
  1,351
  1,397
  1,302
  1,355
  1,410
  1,469
  1,531
  1,597
  1,667
  1,740
  1,818
  1,900
  1,986
  2,077
  2,173
  2,274
  2,380
  2,492
  2,610
  2,734
  2,864
  3,001
Retained Cash Flow (-), $m
  -59
  -73
  -83
  -93
  -104
  -114
  -124
  -134
  -144
  -155
  -166
  -177
  -188
  -200
  -212
  -225
  -238
  -252
  -266
  -281
  -296
  -313
  -330
  -347
  -366
  -385
  -405
  -426
  -449
  -472
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  1,029
  1,035
  1,051
  1,070
  1,092
  1,117
  1,144
  1,174
  1,207
  1,242
  1,137
  1,178
  1,222
  1,269
  1,319
  1,372
  1,429
  1,488
  1,552
  1,619
  1,690
  1,765
  1,844
  1,927
  2,015
  2,107
  2,205
  2,307
  2,415
  2,529
Discount rate, %
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
  966
  907
  854
  801
  747
  692
  638
  583
  529
  475
  376
  332
  291
  251
  215
  181
  150
  122
  98
  77
  60
  45
  34
  24
  17
  12
  8
  5
  3
  2
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Equifax Inc. is a global provider of information solutions and human resources business process outsourcing services for businesses, governments and consumers. The Company operates in four segments: U.S. Information Solutions (USIS), International, Workforce Solutions and Global Consumer Solutions. Its products and services are based on databases of consumer and business information derived from various sources, including credit, financial assets, telecommunications and utility payments, employment, income, demographic and marketing data. It uses statistical techniques and software tools to analyze all available data, creating customized insights, decision-making solutions and processing services for its clients. It helps consumers understand, manage and protect their personal information and make more informed financial decisions. The Company also provides information, technology and services to support debt collections and recovery management.

FINANCIAL RATIOS  of  Equifax, Inc. (EFX)

Valuation Ratios
P/E Ratio 30.8
Price to Sales 4.8
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 18.9
Price to Free Cash Flow 24.2
Growth Rates
Sales Growth Rate 18.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.2%
Cap. Spend. - 3 Yr. Gr. Rate 16%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 78.4%
Total Debt to Equity 100.3%
Interest Coverage 10
Management Effectiveness
Return On Assets 9.8%
Ret/ On Assets - 3 Yr. Avg. 9.7%
Return On Total Capital 11.1%
Ret/ On T. Cap. - 3 Yr. Avg. 10.9%
Return On Equity 19.7%
Return On Equity - 3 Yr. Avg. 18.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 64.6%
Gross Margin - 3 Yr. Avg. 65.5%
EBITDA Margin 34.4%
EBITDA Margin - 3 Yr. Avg. 34.3%
Operating Margin 26%
Oper. Margin - 3 Yr. Avg. 26.1%
Pre-Tax Margin 23.1%
Pre-Tax Margin - 3 Yr. Avg. 23.5%
Net Profit Margin 15.5%
Net Profit Margin - 3 Yr. Avg. 15.6%
Effective Tax Rate 32%
Eff/ Tax Rate - 3 Yr. Avg. 32.9%
Payout Ratio 32.3%

EFX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EFX stock intrinsic value calculation we used $3412 million for the last fiscal year's total revenue generated by Equifax, Inc.. The default revenue input number comes from 0001 income statement of Equifax, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our EFX stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.5%, whose default value for EFX is calculated based on our internal credit rating of Equifax, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Equifax, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of EFX stock the variable cost ratio is equal to 75.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $-1 million in the base year in the intrinsic value calculation for EFX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Equifax, Inc..

Corporate tax rate of 27% is the nominal tax rate for Equifax, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the EFX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for EFX are equal to 99%.

Life of production assets of 19.3 years is the average useful life of capital assets used in Equifax, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for EFX is equal to -4.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3107.8 million for Equifax, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 120.699 million for Equifax, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Equifax, Inc. at the current share price and the inputted number of shares is $15.2 billion.

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