Verisk Analytics (VRSK) Stock Up 31.2% in a Year: Here's Why

Shares of Verisk Analytics, Inc. VRSK have gained 31.2% in the past year, outperforming the industry’s and S&P 500 Composite’s gain of 25.9% and 13.6%, respectively.

 

Catalysts Behind the Upside

Solid Organic Growth

Verisk continues to witness robust organic revenue growth through a combination of increase in new customers for existing solutions, cross-sale of its available solutions to existing customers and the sale of new solutions. The company seeks to expand its portfolio by leveraging its deep knowledge and embedded position to develop new, proprietary data sets and predictive analytics by working with its customers to understand their evolving needs.

In 2017, total revenues grew 5.3% on an organic constant currency basis. In first-quarter 2018, total revenues grew 7% on an organic constant-currency basis. In fact, the company recorded average organic revenue growth of about 8% in the past 10 years.

Subscription & Long-Term Contracts

A major portion of Verisk’s revenues are primarily generated from subscriptions and long-term agreements. As of Mar 31, 2018, Verisk’s three reportable segments: Insurance, Energy and Specialized Markets and Financial Services generated a respective 82%, 80% and 75% of revenues from subscriptions and long-term agreements for its solutions. Verisk’s operation in a large and diverse addressable market with low customer concentration helps mitigate operational risks.

Advanced Technologies

We appreciate Verisk’s expertise in providing predictive data analytics decision by using advanced technologies to collect, interpret and analyze different types of data sets in real time and at scale. The company mainly uses advanced technologies such as the latest remote sensing and machine learning technologies along with cloud computing, which primarily drive the company’s business. A large number of technologies used by Verisk is developed, maintained and supported by almost 20% of its employees.

The company’s efforts to stay technologically updated to meet varying customer and client demands look impressive. Such a deep technical prowess for analytics and Big Data provide it an unrivalled edge over its competitors. All these initiatives augur well for long-term growth and stability of the company.

Strategic Buyouts

Verisk has been continuously acquiring and investing in companies globally to expand its data and analytics capabilities across industries. From 2015-2017, it completed 21 acquisitions. In 2018 so far, the company has acquired two companies — Business Insight Limited on Feb 21 and Marketview Limited on Jan 5. Both these buyouts will help Verisk in its predictive analytics and consumer spending analytics decision making. The company continues to look for strategic acquisitions.

Share Repurchases

We are impressed with Verisk’s endeavors in rewarding its shareholders through share repurchases. In first-quarter 2018, the company repurchased 382,508 shares for an aggregate amount of $40 million. As of Mar 31, 2018, it had $326 million remaining under its share repurchase authorization.

Moreover, in 2017, 2016 and 2015, respectively, Verisk returned 276.3 million, $326.8 million and $20.4 million to its shareholders in the form of share buyback. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business. These shareholder-friendly initiatives not only instill investors’ confidence but also positively impact earnings per share.

Upward Estimate Revisions & Zacks Rank

The direction of estimate revisions serves as an important pointer when it comes to the price of a stock. Over the last 60 days, the Zacks Consensus Estimate for current-quarter earnings increased 4.2%. Estimates for 2018 and 2019 moved up 3.3% and 1.6%, respectively, over the same time frame.

The upward estimate revisions reflect optimism over prospects of this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Positive Earnings Surprise History

Verisk has an impressive earnings surprise history. The company’s earnings have surpassed the Zacks Consensus Estimate in all the previous four quarters, delivering an average positive earnings surprise of 4.8%.

Stocks to Consider

Some better-ranked stocks in the broader Business Services sector include Mastercard Incorporated MA, FLEETCOR Technologies, Inc. FLT and WEX Inc. WEX. While Mastercard and WEX sport a Zacks Rank #1, FLEETCOR carries a Zacks Rank #2.

The long-term expected earnings per share (three to five years) growth rate for Mastercard, FLEETCOR Technologies and WEX is 19%, 16.5% and 14.3%, respectively.

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