On Monday, BofA Securities adjusted their stance on TransUnion (NYSE:TRU), raising the stock from Underperform to Neutral and increasing the price target to $90 from the previous $65. This change reflects a more optimistic outlook on the company's potential, particularly given a stable consumer lending environment and opportunities for increased sales in 2024.
The firm's revised position comes amid observations that the lending environment has shown resilience and stability from the fourth fiscal quarter through the first fiscal quarter, as per commentary from Equifax (NYSE:EFX) and TransUnion, as well as BofA Securities' own evaluations.
Despite a 20% rise in TransUnion's shares year-to-date, which outpaces the S&P 500's 11% gain, BofA Securities remains cautious, awaiting clearer signs of lending acceleration before adopting a more constructive stance.
The new price target of $90 is justified by a modest increase in expected earnings per share (EPS) and the application of a higher earnings multiple. The analyst believes that the current share price already factors in some degree of recovery.
The updated price target is based on a 20 times multiple of the anticipated 2025 EPS, which aligns with recent valuation peaks, as opposed to the previously used 15 times multiple. Adjustments for stock compensation expenses would imply a multiple of around 23 times.
BofA Securities' adjustment indicates a neutral perspective on TransUnion's stock, suggesting that the risks and opportunities are now more evenly balanced. The firm anticipates that the company's international, insurance, and mortgage segments could contribute to sales growth that exceeds the guidance for 2024. Still, the firm is still looking for more concrete evidence of a rebound in lending activities before adopting a more positive view on the stock.
InvestingPro Insights
With BofA Securities upgrading TransUnion's (NYSE:TRU) stock outlook, a glance at the latest data from InvestingPro provides additional context for investors. TransUnion's market capitalization stands at a robust $15.5 billion, indicating a significant presence in the market.
Despite a negative P/E ratio of -75.12, reflecting past challenges, the company's gross profit margins remain impressive at 60.4%, underscoring a strong ability to manage costs relative to revenue.
InvestingPro Tips highlight that TransUnion has raised its dividend for three consecutive years, which may appeal to income-focused investors. Moreover, analysts predict that the company will be profitable this year, suggesting a potential turnaround in financial performance. These insights, coupled with the stock's strong return over the last three months, which amounts to 16.3%, could provide investors with a sense of the company's recent momentum.
Investors interested in a deeper dive into TransUnion's performance can find additional InvestingPro Tips by visiting https://www.investing.com/pro/TRU. There are 6 more tips available, offering further analysis and perspectives. For those looking to access these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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