Is TransUnion overvalued or undervalued?

As of 23 October 2024, TransUnion's valuation grade has moved from risky to expensive. This indicates that the company is currently overvalued. Key ratios reflect this assessment, with a P/E ratio of 36, an EV to EBITDA of 15.50, and a Price to Book Value of 3.94. In comparison, its peer Morningstar, Inc. has a higher P/E of 40.59, suggesting that the market is pricing both companies at a premium, but TransUnion's ratios indicate it may not justify such a high valuation.
The company's current valuation appears excessive given its ROE of 11.07% and ROCE of 9.70%, which are relatively modest compared to the high multiples assigned. Additionally, while TransUnion has shown a 1-year stock return of 17.79%, it has underperformed the S&P 500 over longer periods, such as a 5-year return of -2.59% versus the S&P's 92.42%. Overall, the combination of high valuation ratios and underwhelming performance suggests that TransUnion is overvalued in the current market environment.