The FTSE 100 isn’t known for world-class technology stocks. After all, its largest companies are typically in healthcare, energy, and financials. But there are a couple of data-focussed Footsie shares that could soar in the next bull market.
One of them is a global information services company called Experian (LSE:EXPN). I think this FTSE 100 share has a good chance to break through the £100bn barrier for market capitalisation.
Given it’s currently £36bn, here’s why I think it could triple in size.
A resilient FTSE 100 share
First, it has a strong business model and significant growth potential over the coming years. Experian collects data from thousands of sources, then conducts deep analysis to produce valuable information.
Organisations use its vast databases and analytical tools to make business decisions, particularly regarding credit risk and fraud prevention.
Many of its sales are recurring, as it sells subscriptions to clients. I like companies that have regular revenue streams. It’s a much more reliable form of cash flow, and it sure beats having to wait for one-off, lumpy payments.
It also has multi-year contracts with some of its larger clients. This provides resilience and visibility of sales.
Eggs in multiple baskets
Next, Experian operates in strong and growing markets. A whopping 66% of sales are from North America, and a further 16% are from Latin America. That’s encouraging as these economies are widely expected to grow faster than the UK.
The FTSE 100 is full of globally diversified businesses. And I like that I can own a UK-listed business that doesn’t have all its eggs in one basket.
Experian and AI
Finally, Experian continues to innovate by leveraging new technologies to create new products. Artificial intelligence (AI) has been a key theme in recent years, and Experian has been using it to enhance its fraud prevention tools, optimise its credit risk models, and enhance its marketing strategies.
Bear in mind that success isn’t guaranteed. Experian still faces competition from companies like Equifax. And despite holding many competitive advantages, new entrants can still capture market share over time.
New technologies could disrupt its business model too. The future abilities for AI aren’t currently clear, which would be something to keep an eye on.
Finding high-quality shares
Fundamentally, I’d class Experian as a high-quality share. For instance, it offers a 19% return on capital employed and 24% profit margin. It also benefits from growing and resilient sales and profits. These are all qualities that I search for when looking for the best FTSE 100 shares to buy.
Ultimately, most people and organisations around the world borrow money, whether it’s for a mortgage or to grow a business, for instance. It’s a function of society that’s highly likely to continue far into the future, in my opinion. And as a key intermediary, Experian is in prime position to capitalise on this trend.
I think I’ve just found my new favourite UK technology share. If I had spare cash in my Stocks and Shares ISA, I wouldn’t hesitate to own this for the long term.
