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Whenever the market falls, it may be a good idea to buy stocks that represent quality businesses.
For example, Experian (LSE: EXPN) scores well on quality indicators. And it has a multi-year track record of overall revenue, profit and cash flow growth.
A Nick Train Favorite
He FTSE 100 the company operates as a global provider of information services. And he is one of the favorites of the well-known and successful fund manager Nick Train.
For example, the stock is one of the top 10 holdings in Finsbury Growth and Income Trust, which he manages. And he also has a large personal stake in the trust.
Train aims to buy and hold shares for the long term. And one of its main requirements is that a company has the potential to generate an increasing stream of profits year after year.
Meanwhile, Experian’s normalized earnings are running at a compound annual growth rate (CAGR) of just under 9%. And shareholder dividends have been compounded at just under 6%.
The balance sheet is strong and record operating cash flow shows a CAGR of just over 6%.
There are many things I like about the business, its business history and financial record. And city analysts are predicting high single-digit percentage gains for earnings and dividend in the year to March 2024.
And those estimates are supported by a strong outlook statement delivered in January with the third-quarter business update.
Chief Executive Brian Cassin said at the time that the business performed well in the three months to December 31, 2022. And the results were in line with directors’ expectations.
Continuous and constant growth in the business.
Cassin pointed to new products, new business wins, and consumer expansion as reasons for success.
The pressures on the world economy are likely to continue for some time. But Cassin believes the business will remain resilient. And that’s because of the company’s growth strategy and its increasing countercyclical revenue streams.
We’ll find more information on recent trading with the full-year earnings report to be released on May 16.
Meanwhile, it appears that stocks have been dragged lower in the latest bout of general stock market weakness. With the share price at 2,641 pence, it is around 12% lower than a month ago. And to put that move into perspective, it’s a little over 10% less than last year.
But there is no obvious evidence of immediate problems in the underlying business. Therefore, the current weakness in the price may be an opportunity to make a purchase of the stock for a better value.
However, even now the assessment seems quite complete. And that situation can add some risks for shareholders. After all, even quality companies with strong financials and a decent business track record can run into operational problems from time to time. And if the business exits growth in the future, the valuation could have a lower rate.
Right now, the prospective earnings multiple is just below a lofty 22 for the trading year through March 2024. However, investors may want to dig deeper into the research now with an eye toward making stocks hold at long term in a diversified market. briefcase.
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