AI And Global Platform Transformation Will Drive Powerful Long Term Tailwinds

Catalysts

About TransUnion

TransUnion provides credit, fraud, marketing and consumer data solutions that help businesses assess risk and engage customers.

What are the underlying business or industry changes driving this perspective?

• The completed multiyear technology and operating transformation, including the OneTru platform and standardized global product management, is set up to support operating leverage and higher adjusted EBITDA margins and earnings over time.
• Expanding use of AI across data onboarding, analytics, fraud models and software development is expected to increase customer data consumption and internal productivity, which can support revenue growth and margin expansion.
• The broad rollout of TruIQ analytics, Trusted Call Solutions and fraud offerings across Canada, the U.K., India and other international markets widens the addressable base for higher value solutions, supporting long term revenue growth and adjusted EBITDA.
• Growth in digital marketing and fraud prevention, combined with TransUnion’s identity graph and contributory data networks, positions the company to benefit from rising demand for data rich, AI ready solutions, which can support higher revenue per customer and net margins.
• Secular growth in unsecured lending, digital payments and e-commerce in markets like India and across emerging regions, together with TransUnion’s credit bureau position and new product introductions, provides scope for revenue growth and improved earnings.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on TransUnion compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming TransUnion's revenue will grow by 13.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 10.0% today to 13.4% in 3 years time.
• The bullish analysts expect earnings to reach $894.5 million (and earnings per share of $5.12) by about April 2029, up from $455.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 29.9x on those 2029 earnings, up from 28.8x today. This future PE is greater than the current PE for the US Professional Services industry at 18.2x.
• The bullish analysts expect the number of shares outstanding to decline by 1.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.14%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• India is currently described as a reset year for unsecured lending and credit card originations, with 4% revenue decline in the quarter and lenders prioritizing existing customers and secured products like gold loans. If unsecured lending and card issuance in India remain weak for longer than management expects, the contribution from what is framed as a key long term growth market may stay subdued, which could weigh on group revenue growth and earnings.
• Latin America and Asia Pacific are currently seeing softer economic and lending conditions, with Latin America revenue described as 3% decline and Asia Pacific 11% decline. Management only expects similar trends in early 2026 with gradual improvement, so if these regions remain pressured or face further policy or trade shocks, International may continue to grow slower than U.S. Markets, which could limit overall revenue diversification and constrain margin expansion.
• The mortgage business is guided to US$750 million of reported revenue in 2026 including FICO royalties, with underlying inquiry volumes assumed to show mid single digit decline and a portion of the current uplift driven by FICO related revenue that carries no margin. Any weaker than assumed mortgage activity or customer shift in score delivery models could reduce reported revenue and dampen operating leverage, affecting adjusted EBITDA and earnings growth.
• TransUnion is investing heavily in AI, OneTru and TruIQ, with expectations of productivity gains and higher value solutions. If customers use AI to build more in house models or rely on alternative data sources, they may not increase data consumption or premium product adoption as management anticipates, which could limit pricing power and reduce the expected lift to revenue per customer and net margins.
• The company is counting on ongoing cost savings from the completed transformation program and further country migrations to OneTru to support margin expansion, but large scale platform projects and global operating changes can carry integration, execution and disruption risks. Delays, higher than expected operating costs or the need for additional investment could restrict adjusted EBITDA margin improvement and keep earnings below the current longer term narrative.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for TransUnion is $114.0, which represents up to two standard deviations above the consensus price target of $93.1. This valuation is based on what can be assumed as the expectations of TransUnion's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $114.0, and the most bearish reporting a price target of just $69.0.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $6.7 billion, earnings will come to $894.5 million, and it would be trading on a PE ratio of 29.9x, assuming you use a discount rate of 8.1%.
• Given the current share price of $67.87, the analyst price target of $114.0 is 40.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.