On Thursday, Morgan Stanley updated its financial model for Equifax Inc . (NYSE: NYSE:EFX), resulting in a revised price target. The target has been increased to $240.00 from the previous $225.00, while the firm maintains an Equalweight rating on the stock.
The adjustment to the price target is based on a more detailed analysis of Equifax's business segments. Morgan Stanley has introduced a more granular approach to modeling the company's earnings, breaking down the EWS Verification sub-segment into individual components such as mortgage, government, talent, and consumer.
Similarly, for the USIS Online Information subsegment, growth is now analyzed separately for mortgage, consumer, and non-mortgage non-consumer categories.
The new model anticipates a stronger recovery in the mortgage sector from 2025 to 2027. As a result, Morgan Stanley's projections for mortgage revenue through 2027 amount to approximately $2.3 billion, which includes an estimated 55% incremental margin.
This forecast, still, falls short of Equifax's own projection, which anticipates a total mortgage revenue opportunity of $1.1 billion with a 65% incremental margin as the market normalizes.
The rationale behind the more conservative estimate by Morgan Stanley includes two main factors. Firstly, Equifax has a historical trend of reinvesting back into its operations. Secondly, there is prevailing uncertainty regarding the timeline of the housing market's recovery. The current low supply and the lock-in effect, which could influence market dynamics for years, are contributing to this uncertainty.
Morgan Stanley's revised price target reflects these updated assumptions and expectations for Equifax's business performance over the coming years. The new modeling methodology provides a more detailed outlook on the company's potential revenue streams and growth prospects in its various segments.
InvestingPro Insights
Equifax Inc. (NYSE: EFX) has been the subject of recent financial analysis, with Morgan Stanley revising their price target based on a detailed segment breakdown. Complementing this analysis, InvestingPro provides additional insights that may be of interest to investors.
According to real-time data from InvestingPro, Equifax has a market capitalization of $27.03 billion and is trading at a P/E ratio of 47.84, reflecting a high earnings multiple. The company's revenue for the last twelve months as of Q1 2023 stands at $5.265 billion, with a growth rate of 2.79%, and a notable gross profit margin of 55.65%.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, indicating potential optimism in Equifax's financial performance. Moreover, the company has maintained dividend payments for 54 consecutive years, showcasing a commitment to shareholder returns.
For those looking to delve deeper into Equifax's financial metrics and stock analysis, InvestingPro offers additional tips and insights. Investors can leverage these resources by visiting https://www.investing.com/pro/EFX and using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 15 additional tips listed in InvestingPro, there are ample data points to consider for a comprehensive investment decision.
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