TransUnion - How It's Fared Since the 2015 IPO (TRU)

TransUnion (NYSE: TRU) is a risk services and financial information provider to businesses and consumers. It is a household name and one of the three largest credit reporting agencies in the United States along with Experian and Equifax. The company has a growing presence in overseas markets, which include South Africa, Brazil, Canada, Hong Kong and India. TransUnion is based in Chicago, and it launched its initial public offering (IPO) on June 25, 2015, by selling about 30 million common shares for a price of $22.50 a share.

Business Overview

TransUnion mostly makes money by selling consumers' data to companies that want aggregated or individual consumer reports, risk scores and other information deemed important in determining credit risk of a particular person. TransUnion furnishes credit information and other information products to thousands of businesses and millions of consumers worldwide.

Health care, insurance and banking industries frequently use TransUnion's services to access accurate credit information to make various business decisions, primarily the extension of credit. Landlords and cellphone companies ask for credit reports from TransUnion to judge their potential customers' willingness to pay bills based on prior credit history. The company operates in a segment of the financial services industry highly concentrated with high barriers to entry due to the effort and time it takes to create a large proprietary database on consumers.

Financial Performance

TransUnion demonstrated an annual growth rate of 10.3% from 2013 to 2014. The most recent 12-month trailing data as of Sept. 30, 2015, indicates the company is likely to post another 10% increase in revenues for 2015. TransUnion is in a growth mode, as there are still plenty of organic growth opportunities due to the health demand for its consumer credit reports, and analytical and risk management services from financial and health care companies. The rise of peer-to-peer lending companies and marketplace lenders, such as Lending Club and Social Finance Inc., provides an additional boost to the company's revenues.

Despite growth in its top line, TransUnion's operating income remained stagnant in 2013-2015. As of January 2016, it recently completed major acquisitions, which increased its operating and integration costs of acquired companies. The company is still growing and increasing its head count and marketing efforts to stay ahead of the curve.

TransUnion's Stock Performance

After debuting on the New York Stock Exchange with a closing price of $25.40, TransUnion showed a one-year high of $27.98 and a one-year low of $23.19. December 2015 and January 2016 were very volatile months for the U.S. stock market. The company's stock declined from its one-year high and was trading in the range of $25 to $26 in January 2016. If investors had purchased TransUnion's stock on June 30, 2015, the stock's fourth day of trading, at a closing price of $25.10, they would have made a very negligible cumulative profit in the range of 1 to 2%.

Prior to its most recent earnings release on Oct. 27, 2015, the company's stock declined on low earnings expectations. However, TransUnion exceeded the non-GAAP consensus earnings per share (EPS) of 28 cents by demonstrating a non-GAAP EPS of 30 cents due to better control of costs and higher-than-expected growth in revenues.

TransUnion made good use of its IPO's proceeds of over $660 million by repaying its senior notes due in 2018 that had somewhat high interest rates of approximately 9.6% and 8.1%. As a result of this recapitalization, the company's debt-to-equity ratio substantially decreased from 4.88 in 2014 to 1.77. Going forward, TransUnion will be able to significantly improve its interest coverage ratios and save on the excessive interest payments it paid prior to its IPO. This could positively reflect on the company's stock performance in the future.

TransUnion is likely to show significant improvements in its net margin because it incurred large refinancing and loan fees as a result of retiring its senior notes. Because this expense is off the company's books going forward, its net margins are due to improve further. Based on consensus estimates, TransUnion is due to show non-GAAP EPS of $1.19 in 2016, which represents a growth rate of 22.7% from 2015.

By Andriy Blokhin

Source:http://www.investopedia.com/articles/markets/012916/transunion-how-its-fared-2015-ipo-tru.asp