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Lately investors have been all over FTSE 100-listed Rolls-Royce and Elon Musk’s Space Exploration Technologies Corporation, aka SpaceX.
Both stocks have had their moments, and brokers remain upbeat. Consensus analyst forecasts produce a one-year share price target of just under 1,770p for Rolls-Royce, which if correct is up almost 20% from today’s 1,477p.
I’m worried about Rolls-Royce’s lofty valuation, with its price-to-earnings ratio nudging 50, but I’d say it’s well worth considering if a stock market dip trims that P/E.
Brokers are even more excited about SpaceX, with a consensus one-year target of $223, up 40% from today. Again, I think it’s worth considering, but only for brave investors, given all the concerns and controversies over AI.
Another potential growth hero
Yet analysts are even more optimistic about a FTSE 100 company many investors may have overlooked, global data and credit information giant Experian (LSE: EXPN). Its shares opened the year at 3,332p. Today they cost just 2,457p, down 26%.
Many UK stocks started 2026 well before slipping after the Iran war began on 27 February. Experian was already in trouble. Its shares fell sharply despite a trading update (21 January) showing 8% organic growth. Investors were fretting over AI disruption, competition from credit-scoring rival Fair Isaac, a weaker US dollar and Donald Trump’s threat to cap credit card fees. Experian announced a $1bn share buyback on 29 January, but that did little to reverse the damage.
Nor did record full-year results on 20 May, with statutory pre-tax profit jumping 26% to $1.95bn. Investors were disappointed by full-year organic revenue growth guidance of 6% to 8%, and the shares slumped despite a further £1bn buyback.
Are Experian shares a bargain?
I’ve previously been tempted to buy Experian shares but found them expensive with a price-to-earnings ratio of 30 or more. Today, the trailing P/E is a more amenable 17.2. Experian has huge opportunities in credit data, fraud prevention and financial analytics. There’s still a question over whether AI will allow customers to replicate its services cheaply in-house, but I just can’t see how they’ll match Experian’s vast proprietary datasets.
The Q1 update on 16 July showed organic revenue growth of 7%, with full-year expectations unchanged. That’s encouraging, but again, investors remain wary and rising interest rates aren’t helping, as they fear they may hit demand for borrowing, and therefore credit scoring requests.
Experian has a modest trailing dividend yield of just 2.1% but it’s been increased every year since 2008, except for a freeze in 2021. Over the last five years, payouts have grown at an average annual rate of 8.1%.
Is the recovery back on?
Now here’s the exciting bit. Consensus forecasts produce a one-year share price target of 3,765p. Based on today’s 2,457p, that’s potential growth of more than 53%, beating both Rolls-Royce and SpaceX.
Slower lending, economic uncertainty and AI disruption could all derail the recovery. But that’s one of the most generous forecasts I’ve seen lately.
Experian’s record results, global reach, buybacks and rising dividend give it plenty going for it. I think it’s well worth considering as a long-term recovery play, although the bumpy economy means we can’t expect instant glory. I can see another exciting UK growth stock out there too….
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Harvey Jones owns shares in Rolls-Royce.
This story originally appeared on Motley Fool
