TransUnion (TRU)

Credit reporting company TransUnion (NYSE:TRU) announced better-than-expected revenue in Q1 CY2025, with sales up 7.3% year on year to $1.10 billion. On the other hand, next quarter’s revenue guidance of $1.09 billion was less impressive, coming in 0.8% below analysts’ estimates. Its non-GAAP profit of $1.05 per share was 7.3% above analysts’ consensus estimates.

Company Overview

One of the three major credit bureaus in the United States alongside Equifax and Experian, TransUnion (NYSE:TRU) is a global information and insights company that provides credit reports, fraud prevention tools, and data analytics to help businesses make decisions and consumers manage their financial health.

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.

TransUnion's primary competitors include the other two major credit bureaus, Equifax (NYSE:EFX) and Experian (LON:EXPN), along with specialized competitors in various verticals such as FICO (NYSE:FICO) in credit scoring, Verisk Analytics (NASDAQ:VRSK) in insurance analytics, and LifeLock (owned by NortonLifeLock, NASDAQ:NLOK) in consumer identity protection.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $4.26 billion in revenue over the past 12 months, TransUnion is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, TransUnion grew its sales at an impressive 9.3% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. TransUnion’s annualized revenue growth of 6.9% over the last two years is below its five-year trend, but we still think the results were respectable.

This quarter, TransUnion reported year-on-year revenue growth of 7.3%, and its $1.10 billion of revenue exceeded Wall Street’s estimates by 2.3%. Company management is currently guiding for a 4.3% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will face some demand challenges.

TransUnion has been an efficient company over the last five years. It was one of the more profitable businesses in the business services sector, boasting an average operating margin of 15.5%.

Analyzing the trend in its profitability, TransUnion’s operating margin decreased by 4.2 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.

In Q1, TransUnion generated an operating profit margin of 23.2%, up 7.8 percentage points year on year. This increase was a welcome development and shows it was more efficient.

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.

TransUnion’s EPS grew at an unimpressive 6.7% compounded annual growth rate over the last five years, lower than its 9.3% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of TransUnion’s earnings can give us a better understanding of its performance. As we mentioned earlier, TransUnion’s operating margin improved this quarter but declined by 4.2 percentage points over the last five years. Its share count also grew by 2.7%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q1, TransUnion reported EPS at $1.05, up from $0.92 in the same quarter last year. This print beat analysts’ estimates by 7.3%. Over the next 12 months, Wall Street expects TransUnion’s full-year EPS of $4.05 to grow 4%.

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.

TransUnion 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 10.7% over the last five years, quite impressive for a business services business.

Taking a step back, we can see that TransUnion’s margin dropped by 10.1 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. If the longer-term trend returns, it could signal increasing investment needs and capital intensity.

TransUnion burned through $15.9 million of cash in Q1, equivalent to a negative 1.5% margin. The company’s cash burn was similar to its $8.4 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

TransUnion historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.1%, 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. Unfortunately, TransUnion’s ROIC averaged 3.2 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

TransUnion reported $609.9 million of cash and $5.13 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 $1.55 billion of EBITDA over the last 12 months, we view TransUnion’s 2.9× net-debt-to-EBITDA ratio as safe. We also see its $125.9 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 encouraging to see TransUnion beat analysts’ revenue, EPS, and EBITDA expectations this quarter. On the other hand, its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this quarter was mixed. The stock remained flat at $78 immediately after reporting.

Updated: May 22, 2025 at 12:02 AM EDT

Are you wondering whether to buy TransUnion or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

TransUnion isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its cash profitability fell over the last five years. And while the company’s impressive operating margins show it has a highly efficient business model, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

TransUnion’s P/E ratio based on the next 12 months is 19.6x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $105.06 on the company (compared to the current share price of $82.43).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

To get the best start with StockStory, check out our most recent stock picks, and then sign up for our earnings alerts by adding companies to your watchlist. We typically have quarterly earnings results analyzed within seconds of the data being released, giving investors the chance to react before the market has fully absorbed the information. This is especially true for companies reporting pre-market.