the wall street journal reported that Equifax (NYSE: EFX) provided erroneous credit scores to millions of consumers from mid-March to early April. Equifax blamed a coding issue for the error.
According to the report, several clients’ scores changed by as much as 20 points, which is enough to change the loan applicant’s interest rates and could even result in a rejection.
In response to the report, Equifax announced that fewer than 300,000 consumers saw a score change of 25 points or more. The company identified a coding issue that caused the miscalculation. However, Equifax pointed out that credit reports have not changed due to this issue and pointed out that a change in score does not necessarily indicate that a consumer’s credit decision has been affected. The firm added that the problem was solved.
While the true impact of the error is still unknown, it puts Equifax in a bad light, which is already battling mortgage headwinds.
It’s worth mentioning that Equifax lowered its FY22 revenue forecast twice this year, citing weakness in the mortgage market due to rising interest rates. In addition, unfavorable currency movements remain a drag.
Equifax sees credit applications in the US mortgage market fall more than 46% in 2H22. This assumption indicates that the mortgage market may continue to decline, which would negatively impact Equifax’s financial performance.
Are Equifax shares still a good buy?
While Equifax faces headwinds in the mortgage industry, its non-mortgage business continues to perform well. In the last reported quarter, its non-mortgage business (which accounts for more than 75% of Equifax) recorded solid growth of 22% at constant exchange rates.
Additionally, Needham analyst Kyle Peterson is bullish on EFX. He finds Equifax’s risk-reward ratio “favourable”. Peterson said: “While the challenging macro environment continues to weigh on EFX’s mortgage business, we note that non-mortgage business (75%+) is generating healthy growth and showing no signs of slowing despite the heightened fears of a recession.
Including Peterson, EFX stock received 10 buy recommendations. Additionally, it has three Hold recommendations. Overall, EFX stock has a consensus Strong Buy rating on TipRanks. Meanwhile, analysts’ average price target of $226 implies 9.5% upside potential.
Additionally, EFX stock is receiving positive signals from hedge funds and retail investors who have increased their holdings. Overall, EFX stock has a smart “Perfect 10” score, meaning the stock is likely to outperform the broader market.