Experian (EXPN)

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When investing in the UK market I normally focus my research on FSTE AIM stocks as I think this is where greater growth can be found as the FTSE 100 is very well covered in comparison to small and mid-cap stocks. This means that the market has priced in future growth for the relevant companies. 

However, the FTSE 100 does offer a variety of companies that can provide a good source of steady growth to mitigate risk in your portfolio against smaller, higher-risk growth stocks. A FTSE 100 giant that I think will do well over the long term is Experian, providing a steady stream of growth to support an investor’s portfolio. 

WHAT THEY DO?

Experian is a global information servicing company, supplying global services to over a billion people. They are most famous for their credit checks business, currently one of the top three credit checking agencies globally, but they also offer a variety of information processing services.  

From an investment perspective, the stock is currently doing extremely well with an operating margin of 24%, but more impressively a return on capital employed of 766%. This is extremely impressive and shows how effectively the company uses capital when investing in the company, which is a strong indicator of future success. 

Additionally, the stock offers a relatively high dividend of 1.8% for a growth stock. This again adds to the risk reduction in the portfolio supplying a stream of income, which frees up funds for future investments.

FUTURE GROWTH

The company continues to provide returns for investors, returning over 117% since 2015. I think this growth will continue, supported by both global demand and underlying fundamentals of the business. 

For example, the company as mentioned specialises in data which is becoming increasingly important in society and demand is continuing to grow for its products. Furthermore, Experian offers more than the widely recognised credit checks that they supply, including comparing mortgages and identity fraud services. 


As the world becomes more digital and relies more heavily on big data, Experian will be able to benefit from this by meeting the growing demand for data processing. I can only see the long term becoming more digitally reliant and therefore I think Experian will continue to grow in line with this.
BREXIT-PROOF
Due to Experian’s global presence, with such a large consumer base in the US, the stock provides excellent protection against Brexit. This under reliance on the UK domestic market for revenue reduces the firm’s exposure to Brexit fluctuations, with 57% of revenue coming from the Northern America market versus only 18% from the UK and Ireland market.  
Therefore, regardless of the outcome of Brexit, the company will be able to continue to supply information services globally and as a result, continue to grow in the long term. The stock may not be able to achieve the abnormally high returns that a small AIM stock could, but Experian should be able to provide steady strong returns for investors regardless of the UK economic downturn from Brexit. I would therefore hold the stock for the long term in my core portfolio, if not forever. 


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