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Verisk's Expansion Spree Hurts Profitability Amid Other Woes
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On Jun 6, we updated the research report on business information services manufacturer Verisk Analytics, Inc. (VRSK - Free Report) .
Headquartered in Jersey City, NJ, Verisk offers data analytics services to diverse industries such as insurance, natural resources, healthcare, financial services, government, and risk management. Leveraging unique data assets and deep domain expertise, Verisk provides first-to-market predictive analytics and decision support solutions that are integrated into customer workflows for a positive outcome. Over the years, Verisk solutions have enabled customers to take informed decisions about risk, investments, and operations with greater precision, efficiency, and discipline.
A significant portion of the company’s revenues is generated from operations outside the United States. With modest revenues coming from the U.K., Verisk is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering productivity of the company. These undermine the long-term growth potential of the company to some extent.
Verisk has grossly underperformed the Business - Information Services industry in the last three months with an average loss of 0.4% against a gain of 4.4% for the latter. On a P/E (TTM) basis, Verisk looks a bit overvalued compared with the benchmark S&P 500 index with respective tallies of 26.3x and 20.4x in the last three-month period. The stock is currently trading at the lower range of this period. This forces us to be somewhat cautious on the stock and investors should ideally wait for a better entry point.
The company recently acquired MAKE, a leading research and advisory business specializing in wind power. Per the deal, MAKE will become part of Verisk’s operating unit, Wood Mackenzie. This acquisition will enhance the company’s offerings to its existing clients and help it become the leading market analysis and advisory firm. Also, in Jul 2016, Wood Mackenzie acquired Greentech Media. The company is continuing to expand its foothold in data and insight for the power and renewables sector. Decarbonization is currently in demand in the energy industry. Wood Mackenzie is strategically acquiring such companies to offer its clients the most advanced solutions in the renewables sector. The addition of MAKE to Wood Mackenzie would complement the company’s existing practice. The continuous acquisitions, however, are putting pressure on the company’s profitability.
However, Verisk has a recurring revenue stream with 75% of its total revenue generated from subscription and long-term contracts. In addition, the company has a large and diverse addressable market with low customer concentration that mitigates operating risks. Operating in an industry with high barriers to entry, Verisk has an integrated research, sales & marketing, and consulting model designed to best serve client needs. This enables it to offer a steady stream of first-to-market innovations that provide a competitive advantage against its rivals.
Verisk currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Hitachi, Ltd. (HTHIY - Free Report) , Publicis Groupe S.A. (PUBGY - Free Report) and NCI, Inc. . Publicis Groupe and NCI carry a Zacks Rank #2 (Buy), while Hitachi sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hitachi is currently trading at a forward P/E of 11.5x. It has a long-term earnings growth expectation of 13%.
Publicis Groupe has a long-term earnings growth expectation of 9.51%. It is currently trading at a forward P/E of 14.3x.
NCI has a long-term earnings growth expectation of 5%. It is currently trading at a forward P/E of 19.4x.
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Verisk's Expansion Spree Hurts Profitability Amid Other Woes
On Jun 6, we updated the research report on business information services manufacturer Verisk Analytics, Inc. (VRSK - Free Report) .
Headquartered in Jersey City, NJ, Verisk offers data analytics services to diverse industries such as insurance, natural resources, healthcare, financial services, government, and risk management. Leveraging unique data assets and deep domain expertise, Verisk provides first-to-market predictive analytics and decision support solutions that are integrated into customer workflows for a positive outcome. Over the years, Verisk solutions have enabled customers to take informed decisions about risk, investments, and operations with greater precision, efficiency, and discipline.
A significant portion of the company’s revenues is generated from operations outside the United States. With modest revenues coming from the U.K., Verisk is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering productivity of the company. These undermine the long-term growth potential of the company to some extent.
Verisk has grossly underperformed the Business - Information Services industry in the last three months with an average loss of 0.4% against a gain of 4.4% for the latter. On a P/E (TTM) basis, Verisk looks a bit overvalued compared with the benchmark S&P 500 index with respective tallies of 26.3x and 20.4x in the last three-month period. The stock is currently trading at the lower range of this period. This forces us to be somewhat cautious on the stock and investors should ideally wait for a better entry point.
The company recently acquired MAKE, a leading research and advisory business specializing in wind power. Per the deal, MAKE will become part of Verisk’s operating unit, Wood Mackenzie. This acquisition will enhance the company’s offerings to its existing clients and help it become the leading market analysis and advisory firm. Also, in Jul 2016, Wood Mackenzie acquired Greentech Media. The company is continuing to expand its foothold in data and insight for the power and renewables sector. Decarbonization is currently in demand in the energy industry. Wood Mackenzie is strategically acquiring such companies to offer its clients the most advanced solutions in the renewables sector. The addition of MAKE to Wood Mackenzie would complement the company’s existing practice. The continuous acquisitions, however, are putting pressure on the company’s profitability.
However, Verisk has a recurring revenue stream with 75% of its total revenue generated from subscription and long-term contracts. In addition, the company has a large and diverse addressable market with low customer concentration that mitigates operating risks. Operating in an industry with high barriers to entry, Verisk has an integrated research, sales & marketing, and consulting model designed to best serve client needs. This enables it to offer a steady stream of first-to-market innovations that provide a competitive advantage against its rivals.
Verisk currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Hitachi, Ltd. (HTHIY - Free Report) , Publicis Groupe S.A. (PUBGY - Free Report) and NCI, Inc. . Publicis Groupe and NCI carry a Zacks Rank #2 (Buy), while Hitachi sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hitachi is currently trading at a forward P/E of 11.5x. It has a long-term earnings growth expectation of 13%.
Publicis Groupe has a long-term earnings growth expectation of 9.51%. It is currently trading at a forward P/E of 14.3x.
NCI has a long-term earnings growth expectation of 5%. It is currently trading at a forward P/E of 19.4x.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>