Equifax (EFX)

Credit reporting giant Equifax (NYSE:EFX) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.2% year on year to $1.54 billion. The company expects next quarter’s revenue to be around $1.52 billion, close to analysts’ estimates. Its non-GAAP profit of $2.04 per share was 5.4% above analysts’ consensus estimates.

Company Overview

Holding detailed financial records on over 800 million consumers worldwide and dating back to 1899, Equifax (NYSE:EFX) is a global data analytics company that collects, analyzes, and sells consumer and business credit information to lenders, employers, and other businesses.

A combination of increasing reliance on data and analytics across various industries and the desire for cost efficiency through outsourcing could mean that companies in this space gain. As functions such as payroll, HR, and credit risk assessment rely on more digitization, key players in the data & business process services industry could be increased demand. On the other hand, the sector faces headwinds from growing regulatory scrutiny on data privacy and security, with laws like GDPR and evolving U.S. regulations potentially limiting data collection and monetization strategies. Additionally, rising cyber threats pose risks to firms handling sensitive personal and financial information, creating outsized headline risk when things go wrong in this area.

Equifax's primary competitors include the other two major credit reporting agencies: Experian (OTCMKTS: EXPGY) and TransUnion (NYSE: TRU). In employment verification services, it competes with companies like ADP (NASDAQ: ADP) and smaller providers such as Thomas & Company. In identity protection, competitors include LifeLock (owned by NortonLifeLock, NASDAQ: NLOK) and Credit Karma (owned by Intuit, NASDAQ: INTU).

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $5.94 billion in revenue over the past 12 months, Equifax is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Equifax’s sales grew at a solid 8.7% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Equifax’s annualized revenue growth of 7.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Workforce Solutions and U.S. Information Solutions, which are 42% and 34.3% of revenue. Over the last two years, Equifax’s Workforce Solutions revenue (HR services) averaged 5.8% year-on-year growth while its U.S. Information Solutions revenue (credit services) averaged 9.2% growth.

This quarter, Equifax reported year-on-year revenue growth of 7.2%, and its $1.54 billion of revenue exceeded Wall Street’s estimates by 1.4%. Company management is currently guiding for a 7.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 7.8% over the next 12 months, similar to its two-year rate. This projection is commendable and suggests the market is baking in success for its products and services.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Equifax has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average operating margin of 19.3%.

Looking at the trend in its profitability, Equifax’s operating margin decreased by 3.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Equifax generated an operating margin profit margin of 17.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Equifax’s EPS grew at a weak 3.7% compounded annual growth rate over the last five years, lower than its 8.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Equifax’s earnings to better understand the drivers of its performance. As we mentioned earlier, Equifax’s operating margin was flat this quarter but declined by 3.5 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Equifax, its two-year annual EPS growth of 9.4% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q3, Equifax reported adjusted EPS of $2.04, up from $1.85 in the same quarter last year. This print beat analysts’ estimates by 5.4%. Over the next 12 months, Wall Street expects Equifax’s full-year EPS of $7.69 to grow 10.7%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Equifax has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.4% over the last five years, quite impressive for a business services business.

Equifax’s free cash flow clocked in at $437.9 million in Q3, equivalent to a 28.3% margin. This result was good as its margin was 3.7 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Equifax historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 11.4%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Equifax’s ROIC averaged 2 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Equifax reported $189 million of cash and $4.81 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.93 billion of EBITDA over the last 12 months, we view Equifax’s 2.4× net-debt-to-EBITDA ratio as safe. We also see its $109.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Equifax beat analysts’ revenue and EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Full-year EPS guidance was raised slightly, which is a good sign. On the other hand, its EPS guidance for next quarter missed. Zooming out, we still think this was a solid quarter. The stock traded up 2.8% to $237.51 immediately following the results.

Updated: December 4, 2025 at 11:07 PM EST

Before making an investment decision, investors should account for Equifax’s business fundamentals and valuation in addition to what happened in the latest quarter.

Equifax doesn’t top our investment wishlist, but we understand that it’s not a bad business. First off, its revenue growth was solid over the last five years, and analysts believe it can continue growing at these levels. And while Equifax’s declining adjusted operating margin shows the business has become less efficient, its impressive operating margins show it has a highly efficient business model.

Equifax’s P/E ratio based on the next 12 months is 24.9x. Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $267.80 on the company (compared to the current share price of $211.25).