Usually when a share price falls sharply, it’s because something has gone wrong. Profits are under pressure, growth is slowing, or a company’s competitive position is weakening.
Yet, none of those explanations obviously fits Experian (LSE: EXPN). The business continues to deliver solid growth and management remains confident about the future.
So, why have the shares fallen so heavily over the past year?
Changing sentiment
Much of the recent weakness appears to stem from changing investor expectations rather than deteriorating business performance.
During the post-pandemic boom, investors were willing to pay a premium for high-quality companies capable of delivering consistent growth. However, higher interest rates and a more uncertain economic outlook have made the market less willing to pay elevated valuations.
At the same time, the rapid rise of artificial intelligence has prompted questions about whether traditional information and data businesses could face new competitive threats.
Companies such as Experian and RELX derive much of their value from proprietary datasets and analytics, but some investors worry that new AI-driven business models could alter the competitive landscape.
As a result, sentiment towards the shares has weakened, even though the underlying business has continued to grow.
Has the market got this all wrong?
At the heart of the investment debate is a simple question: what happens if credit growth slows?
With household debt levels elevated in many markets, banks could become more selective about lending and consumers may borrow less. On the surface, that sounds like bad news for a company whose roots lie in credit reporting.
However, I think there is another side to the story. Despite often being viewed as a credit bureau, Experian has evolved into a far more diversified business. Today, it generates revenue from healthcare, automotive, fraud prevention, analytics, and software solutions, helping it deliver growth through a wide range of economic environments.
That resilience is important because much of the company’s growth now comes from developing new products and extracting greater value from its data assets rather than simply benefiting from higher lending volumes.
I’m also not convinced AI is necessarily the threat some investors fear. While new models may change how information is accessed, they still require high-quality data to produce useful outcomes. The company’s competitive advantage lies in the vast proprietary datasets it has built over decades, which are difficult for rivals to replicate.
If anything, greater use of AI could increase demand for trusted data and analytics rather than reduce it.
What’s the verdict?
Ultimately, I think the debate comes down to expectations. Experian is unlikely to deliver explosive growth, and the days when investors were willing to pay almost any price for high-quality data businesses may be over.
However, the company continues to grow organically, generate strong cash flows, and invest in new opportunities across analytics and fraud prevention. While some investors appear concerned that AI could undermine its competitive position, I see a reasonable case that trusted proprietary data becomes even more valuable as AI adoption increases.
That doesn’t mean the shares will immediately return to their previous highs. Investor sentiment can remain weak for extended periods, particularly when growth expectations are being reset across the market.
Nevertheless, for long-term investors seeking exposure to a high-quality business with durable competitive advantages, I think Experian remains one worth considering.
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Andrew Mackie does not hold any positions in the companies mentioned.
