Financial Review: Equifax (EFX) versus Moody’s (MCO)

Equifax (NYSE: EFX) and Moody’s (NYSE:MCO) are both large-cap business services companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, dividends, risk, valuation, analyst recommendations and institutional ownership.

Dividends

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Equifax pays an annual dividend of $1.56 per share and has a dividend yield of 1.3%. Moody’s pays an annual dividend of $1.76 per share and has a dividend yield of 1.1%. Equifax pays out 26.1% of its earnings in the form of a dividend. Moody’s pays out 29.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Equifax has raised its dividend for 6 consecutive years and Moody’s has raised its dividend for 8 consecutive years. Equifax is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

93.4% of Equifax shares are held by institutional investors. Comparatively, 88.5% of Moody’s shares are held by institutional investors. 1.5% of Equifax shares are held by company insiders. Comparatively, 1.0% of Moody’s shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Equifax and Moody’s’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Equifax $3.36 billion 4.25 $587.30 million $5.97 19.91
Moody’s $4.20 billion 7.46 $1.00 billion $6.07 27.02

Moody’s has higher revenue and earnings than Equifax. Equifax is trading at a lower price-to-earnings ratio than Moody’s, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Equifax has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500. Comparatively, Moody’s has a beta of 1.26, indicating that its stock price is 26% more volatile than the S&P 500.

Profitability

This table compares Equifax and Moody’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Equifax 17.47% 23.31% 10.28%
Moody’s 23.80% -319.45% 16.19%

Analyst Ratings

This is a summary of recent ratings and price targets for Equifax and Moody’s, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Equifax 1 7 8 0 2.44
Moody’s 0 8 3 0 2.27

Equifax presently has a consensus target price of $127.33, suggesting a potential upside of 7.11%. Moody’s has a consensus target price of $168.27, suggesting a potential upside of 2.59%. Given Equifax’s stronger consensus rating and higher possible upside, equities analysts clearly believe Equifax is more favorable than Moody’s.

Summary

Moody’s beats Equifax on 9 of the 17 factors compared between the two stocks.

About Equifax

Equifax Inc. provides information solutions and human resources business process outsourcing services for businesses, governments, and consumers. The company operates through four segments: U.S. Information Solutions (USIS), International, Workforce Solutions, and Global Consumer Solutions. The USIS segment offers consumer and commercial information services, such as credit information and credit scoring, credit modeling and portfolio analytics, locate, fraud detection and prevention, identity verification, and other consulting; mortgage loan origination information; financial marketing; and identity management services. The International segment provides information service products, which include consumer and commercial services, such as credit and financial information, and credit scoring and modeling; and credit and other marketing products and services, as well as offers information, technology, and services to support debt collections and recovery management. The Workforce Solutions segment provides employment, income, and social security number verification services; and payroll-based transaction and employment tax management services. The Global Consumer Solutions segment offers credit information, credit monitoring, and identity theft protection products directly to consumers through the Internet and hard-copy formats. It serves customers in financial service, mortgage, employers, consumer, commercial, telecommunication, retail, automotive, utility, brokerage, healthcare, and insurance industries, as well as state and federal governments. The company operates in the United States, Canada, Australia, New Zealand, the United Kingdom, Spain, Portugal, Argentina, Brazil, Chile, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Uruguay, Peru, the Republic of Ireland, Russia, India, Cambodia, Malaysia, Singapore, and Dubai. Equifax Inc. was founded in 1899 and is headquartered in Atlanta, Georgia.

About Moody’s

Moody's Corporation provides credit ratings; and credit, capital markets, and economic related research, data, and analytical tools worldwide. It operates through two segments, Moody's Investors Service and Moody's Analytics. The Moody's Investors Service segment publishes credit ratings on various debt obligations and entities that issue such obligations comprising various corporate and governmental obligations, structured finance securities, and commercial paper programs. This segment provides ratings in approximately 120 countries. Its ratings are disseminated through press releases to the public through print and electronic media, including the Internet and real-time information systems for use by securities traders and investors. As of December 31, 2017, this segment had ratings relationships with approximately 4,700 non-financial corporate issuers; 4,100 financial institutions issuers; 18,000 sovereign, sub-sovereign, and supranational public finance issuers; and 1,000 infrastructure and project finance issuers, as well as rated 11,000 structured finance transactions. The Moody's Analytics segment develops products and services that support financial analysis and risk management activities of institutional participants in financial markets; and distributes research and data, such as research on debt issuers, industry studies, and commentary on topical credit related events. This segment also offers economic research, and credit data and analytical tools; software solutions and related risk management services; and offshore research and analytical services with financial training and certification programs. The company was formerly known as Dun and Bradstreet Company and changed its name to Moody's Corporation in September 2000. Moody's Corporation was founded in 1900 and is headquartered in New York, New York.

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