Shares in credit checking firm Experian Group PLC (LON:EXPN) were downgraded by a leading investment bank today on valuation grounds with the share price within a whisker of its fair value.
Heavy-hitter Credit Suisse said Experian was worth 1,630p a share - 14p above the current price - as it moved to a ‘neutral’ recommendation from ‘outperform’.
Headwinds for the business are stiffening, the Swiss outfit said.
“Consumer Services will, we think, remain under pressure in the UK as the business model evolves but should benefit from the roll out of its lead generation offering,” CS explained in a note to clients.
“While Experian's brand and position as a credit bureau provides operational and product quality advantages in a large addressable market we also see potential for pressure on margins in a competitive environment.”
That said, there are enough positives to ensure the business grows in the mid single digits.
They include continued strong demand for its services in the US and the marked improvement in key territory Brazil.
Experian’s ability to generate cash will provide funds to bankroll an earnings accretive share buy-back programme, possibly leaving enough for acquisitions too.
At 10am, the shares were off 4p at 1,616p.
Of the 12 City analysts logged as following Experian by the Brokerforecasts website, six have ‘buy’ recommendations on the stock. There are two ‘sellers’, while the remainder are in Credit Suisse’s camp as seeing the stock as fully valued.
The consensus price target, which was 1,527p six months ago, is currently 1,682p.