Topic: Growth Stocks


DUN & BRADSTREET CORP. $94(New York symbol DNB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 36.1 million; Market cap: $3.4 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.1%; TSINetwork Rating: Average; is the world’s largest provider of credit reports on individual companies.

Established in 1841, its database contains information on 240 million businesses in over 200 countries. Clients use these reports to make lending and purchasing decisions and to limit their credit losses.

The company gets 60% of its revenue from credit reports. The remaining 40% comes from other information products, such as software businesses use to manage websites and customer data.

Revenue falls as D&B adjusts

Dun & Bradstreet’s revenue fell 9.9%, from $1.8 billion in 2011 to $1.6 billion in 2014. The company sold some of its less-important operations as customer demand for its cloud-based subscription service rose. As part of this strategy, Dun & Bradstreet paid $328.5 million to re-acquire Dun & Bradstreet Credibility Corp. It sells credit reports and related services to small businesses in the U.S. Dun & Bradstreet also purchased NetProspex for $124.5 million. That company helps businesses collect corporate officers’contact information, including email addresses, phone numbers and titles. The two purchases lifted Dun & Bradstreet’s revenue to $1.7 billion in 2015.

To help pay for the acquisitions, the company sold its operations in Australia and New Zealand for $169.8 million.

Earnings improved 4.0%, from $309.1 million in 2011 to $321.5 million in 2012. Dun & Bradstreet is an aggressive buyer of its own stock, so earnings per share jumped 11.5%, from $6.27 to $6.99. Overall earnings then fell to $263.9 million in 2015, but pershare earnings rose to $7.25.

Debt is high, but manageable

Dun & Bradstreet borrowed the funds it needed for its recent acquisitions. As a result, its long-term debt rose from $1.35 billion at the end of 2014 to $1.8 billion in 2015. That’s a high 53% of its market cap.

However, the company’s free cash flow (cash flow minus capital expenditures) rose 8.7%, to $272.0 million in 2015 from $250.2 million in 2014. That gives it plenty of room to pay down its debt. It also ended 2015 with cash of $365.7 million.

Due to Dun & Bradstreet’s shift to a subscription model, its deferred revenue jumped 14% in 2015 to $647.8 million. These funds will eventually spur the company’s future growth.

Low p/e for a market leader

In 2016, Dun & Bradstreet expects its revenue will rise 4% to 6%. Earnings should improve to $8.00 a share, and the stock trades at 11.8 times that estimate. That’s a low multiple in light of its well-known brand. Also, client migration to cloud-based services continues to cut Dun & Bradstreet’s delivery costs.

The company recently boosted its dividend by 4.3%; the new annual rate of $1.93 a share yields 2.1%. It has now raised the rate each year since 2007.

Dun & Bradstreet is a buy.


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