Equifax

We’ve updated our model and company report on Equifax.

The bottom line: We are maintaining our $205 fair value estimate and narrow moat rating, but we are downgrading our Capital Allocation to Standard from Exemplary as we calibrate our ratings. Over the years, we've generally found the firm's acquisitions to be logical. While the firm's 2021 acquisitions (Kount and Appriss Insights) look expensive relative to its more recent acquisitions of Boa Vista (2023) and Circulo de Credito (currently pending), we do not see the firm's acquisition strategy as being value-destructive. Our rationale for the downgrade is the firm's operational execution. In recent years, Equifax has seen both lower adjusted EBITDA margins and higher capital expenditures (as a percent of revenue) than its closest peers, TransUnion and Experian.

The Big Picture: We suspect one of the main issues for Equifax is its heavy reliance on contractors, which totaled 7,900 at the end of 2025. Both Experian's and TransUnion's contractor usage appears far smaller. In addition, with increased cloud usage, we're puzzled why margins aren't expanding more. We do not see Equifax as disadvantaged relative to peers. If anything, it is advantaged with its high-margin Workforce Solutions segment. Taking a broader view within financial services, we are seeing companies insource to better manage expenses. Northern Trust, for example, noted in February that it was insourcing some activities, as contractors, by their very nature, are 20% to 30% more expensive.

To put numbers on it, Equifax’s adjusted EBITDA margins of 31.9% compare unfavorably to TransUnion’s 32.8% (including stock-based compensation) and Experian’s 35.6% (fiscal 2026 ending March 31, 2026). A similar pattern holds for the first half of 2026. Capital expenditures have also been higher, averaging about 10% of revenue over the last five years versus 8%-9% for Experian and TransUnion. Thus, accounting for capital expenditures, the EBITDA margin shortfall becomes more pronounced.

We maintain our $205 fair value estimate on Equifax. Our discounted cash flow-based analysis indicates a 2026 price/adjusted earnings ratio of approximately 25 times and a 2027 ratio of 21 times. While this multiple might seem high, we believe it is warranted, given Equifax's leading position in income and employment verification services and the potential for a rebound in mortgage activity.

We project revenue to increase at approximately a 10% compound annual growth rate over the next five years. Our projections do not include any uncompleted acquisitions. We expect adjusted EBITDA margins to grow over the forecast period as investment spending begins to level off and highly incremental Workforce Solutions revenue flows to the bottom line. Specifically, we model 2030 margins of 33.7%, up from 31.2% in 2026 and 31.9% in 2025.

By segment, we continue to see Workforce Solutions as the fastest-growing, as its income and employment verification data set is differentiated and has opportunities for expansion into use cases such as government services and non-mortgage consumer lending. In addition, the firm continues to expand its records, improving its revenue realization from queries at existing clients. As such, we model Workforce Solutions revenue growth in the low double digits over our five-year forecast period. We generally model the credit bureau business to grow in the high-single-digit percentage range. In the US, this is driven by pricing and assumptions of modest volume recovery in mortgages. Outside the US, this is driven by pricing, expanding GDP, and use cases in emerging markets. We peg Equifax’s cost of capital at 8.1%, based on an 8.9% cost of equity.

We view Equifax as a narrow-moat business with an intangible moat driven by its proprietary data. While we see Equifax’s data as highly proprietary, we do not see the firm’s return profile as high enough to warrant a wide economic moat rating.

Equifax’s largest segment is Workforce Solutions, which stems from its 2007 acquisition of TALX for $1.4 billion. The primary business of EWS is income and employment verification for lenders (such as mortgage lenders), governments (for determining benefits and other use cases), and corporate HR departments (for verifying new talent). Equifax sources its payroll records through direct relationships with large employers and through payroll partnerships, many of which are exclusive.

While payroll records gathered directly are not contractually exclusive, in practice we believe they are. First, payroll data is sensitive, and employers would prefer not to send it to multiple parties. Second, the income and employment verification services are free, from the employer's perspective, as Equifax bills the lender or verifier for the service, so there's little upside for an employer to share data with another provider.

Given the need to persuade businesses to share sensitive employee income data, we believe this business benefits from a first-mover advantage that allowed it to amass a sizable number of records. We note that margins have meaningfully expanded in recent years as its database has grown. From a payroll provider's perspective (such as Intuit, Paychex, and so on), which receives a revenue share, we believe it is logical for them to sign an exclusive agreement to secure a larger share of revenue.

Given Equifax’s access to exclusive data, the business has shown meaningful pricing power in recent years. We point to the following examples. Experian has built up a competing service, but due to exclusive contracts, it has only a fraction of the records that Equifax has. In addition, Equifax competes with self-reported or consumer-permissioned payroll data (for example, through a myADP login or something similar), but these solutions create friction for consumers.

Equifax’s credit bureau operations provide lenders and other institutions with data, including credit history, current credit status, payment history, address, and other identity information. Equifax’s data is critical to customers' underwriting decisions and other workflows, such as identity verification and fraud detection. The price of its services is small relative to the lending volume. For example, there is approximately $1.3 trillion in revolving debt (that is, credit card debt) outstanding currently, and we estimate that US card-related revenue from all three bureaus is less than $1 billion, which equates to a single-digit basis point. Because the accuracy and completeness of data is critical to credit decision-making, lenders often pull from more than one credit bureau (particularly in scenarios where they have incomplete information), and we do not believe pricing is the primary factor for choosing a credit bureau.

We believe the barriers to entering the credit bureau business are high, as replicating a database of millions of customers would be difficult. Because credit bureaus’ data is based on the voluntary reporting of thousands of financial institutions, it’s unlikely that a startup, particularly given heightened data security concerns, could convince banks to share consumer information.

Mortgage-related revenue makes up 28% of USIS revenue. Government agencies such as Fannie Mae and Freddie Mac require a credit report from all three bureaus, which is known as a “tri-merge” report. Currently, the majority of mortgages originated in the US are conforming, so using Equifax (along with TRU and EXPN) is essentially required. That said, due to rising credit reporting costs, we cannot rule out the possibility that the tri-merge becomes optional and that only one or two bureaus are required for government-conforming mortgages.

The 24% of firmwide revenue that Equifax generates outside the United States tends to be slightly lower margin than its US operations. We attribute this to the relatively fixed-cost nature of Equifax’s operations and lower scale in smaller markets compared with the US. While the competitive position of the company’s international operations varies somewhat with its relative size, international markets tend to mirror the oligopolistic structure seen in the US, with only a few viable competitors in each country.

We also see little risk of AI disruption. Equifax's core data sets are proprietary, and we believe that 90% of its revenue that's being generated from proprietary data has merit. Furthermore, there is some evidence that Equifax’s most sophisticated clients, in terms of AI usage, are using Equifax data more, not less.

From a quantitative perspective, Equifax’s returns on invested capital over the last five years (2021-25) were 7.9%, including goodwill, and 21.3% excluding goodwill, by our calculations. These ROICs were not strong enough, in our view, to warrant a wide rating. We peg Equifax’s weighted average cost of capital at 8.1%.

The Workforce Solutions segment is a fast-growing business built on unique data and can contribute meaningfully to earnings growth. Equifax can increase use cases in nonmortgage applications for income verification.

A mortgage market recovery could bring the firm meaningful high-margin incremental revenue.

VantageScore traction in mortgage and non-mortgage markets may offer upside.

Mortgage volume drives Equifax's core credit bureau business and its Workforce Solutions segment, but it is difficult to predict, given its sensitivity to mortgage rates and homebuying activity. In addition, higher rates will weigh on the purchasing and refinancing mortgage market.

While Equifax is the leader in income verification, its success could attract new entrants.

Equifax faces operational risk related to data security. Another breach could materially affect the firm's ability to win new business or new partnerships.