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Will Fannie Mae Deal Boost TransUnion?


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S ince its initial public offering on June 25, credit reporting agency TransUnion has moved full speed ahead to assure that it stays on the right growth trajectory.

That trajectory encompasses several growth areas forTransUnion ( TRU ), which provides risk and information services to businesses and consumers.

Businesses use its information services for a number of functions, including acquiring new customers, assessing a consumer's ability to pay for services, measuring and managing debt portfolio risk, collecting debt and verifying consumer identities.

Consumers use its services to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft.

Different Take On Data

TransUnion has identified three areas of growth, says Curt Miller, the company's senior vice president of global strategy and M&A.

The primary drivers are new product development and growth in emerging businesses and geographic markets, he says. The company also continues efforts to boost its core business in such markets as financial services.

One such product is CreditVision, which TransUnion launched in 2013 and which has been gaining momentum ever since.

"CreditVision is an example of a different way of looking at the same credit bureau data," Miller told IBD.

Here's why: A traditional credit report is a snapshot in time of a consumer's credit, he says. In contrast, CreditVision looks at the trends that happened to the consumer over time, before the snapshot, to indicate risk level.

TransUnion is expanding CreditVision in the U.S., thanks partly to a deal with mortgage giantFannie Mae ( FNMA ) to provide its trended consumer credit data in the assessment of mortgage applicants.

During the middle of next year, Fannie Mae will require lenders to used "trended" credit data when underwriting single-family borrowers through its automated underwriting system.

That's where TransUnion comes in. Fannie Mae will integrate trended views from TransUnion's CreditVision product offering into mortgage application assessments, starting in the middle of next year.

Reporting bureauEquifax ( EFX ) will also provide trended data to Fannie Mae starting in mid-2016, Fannie Mae said in a press release.

Stifel analyst Shlomo Rosenbaum says that TransUnion is the only company offering the kind of real-time trended data that CreditVision provides.

"We understand that (Equifax) is investing to improve its trended data product to be ready for that mid-2016 deadline, and that (rival Experian) does not have a product in that area yet to speak of," Rosenbaum noted in a report.

TransUnion is the last of the Big Three global credit reporting bureaus to go public. Equifax has been trading on the NYSE for a long time, and Experian trades on the London Stock Exchange.

'Good Flywheel'

TransUnion priced its IPO at 22.50, opened at 24.62 and closed the day at 25.40. The stock has since traded in a tight range and currently trades near 26.

"People need to get more familiarity," Rosenbaum said. "When they see it puts up good numbers and good growth, you will see more investors getting behind the story. It seems like they've built a good flywheel for strong growth."

TransUnion's third-quarter numbers were pretty decent. Revenue rose 15% from a year earlier to $389.1 million, well about consensus analyst estimates. Earnings came in at 27 cents a share, according to Thomson Reuters -- 1 cent below views.

"We experienced robust demand from business customers and consumers for core and new products across our markets," CEO Jim Peck said on a Q3 conference call.

Among TransUnion's strengths during the quarter was its CreditVision business, which saw revenue more than double during the quarter.

Analysts polled by Thomson Reuters expect TransUnion's full-year earnings to rise 24% in 2016 and another 12% in 2017.

New products should help fuel that growth.

"We continue to innovate around CreditVision," Miller said.

For example, TransUnion in October released CreditVision Link, which combines alternative data with trended credit bureau data to help score even more of the population that can't normally be scored.

CreditVision Link's alternative data assets include property, tax and deed records, checking/debit accounts and payday lending information. These alternative data sources have proven to accurately score more than 90% of applicants whom traditional models would otherwise return as no-hit or thin-file.

Going International

TransUnion also has taken CreditVision internationally to Canada and Hong Kong, and it has plans to continue expansion into more foreign markets.

An example of an emerging business segment is in health care, where TransUnion provides hospitals with several solutions. Its products have helped more than 1,000 hospitals and thousands of physician partners identify over $5 billion in uncompensated care revenue, Miller says.

As part of its initiatives in its core business, TransUnion is taking steps to get closer to its customers, he says. These steps include bringing on sales professionals and consultants who have experience and backgrounds working for TransUnion's customers.

"This gives them the ability to see what customers' problems are and partner with customers to solve their problems," said Miller.

TransUnion is a part of IBD's Financial Services-Specialty industry group. It has an 86 IBD Composite Rating out of a possible 99. The group also includesCBOE Holdings ( CBOE ), which has a 96 IBD Composite Rating.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Investing Ideas
Referenced Symbols: TRU , FNMA , EFX , CBOE



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