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Verisk Poised for Healthy Inorganic Growth Despite Risks
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On Sep 5, we issued an updated research report on business services provider, Verisk Analytics, Inc. (VRSK - Free Report) .
Growth Drivers
Using advanced technologies to collect and analyze troves of data, Verisk draws on unique data assets and deep domain expertise to provide predictive analytics and decision support solutions that are integrated into customer workflows. These help its customers to take informed decisions with greater precision, efficiency and discipline about various risks involved in the businesses. In order to create long-term value for its clients, the company has extended its scalable data and analytic solutions by steadily putting resources into overseas markets. The scalability of its products has further led to highly cash-generative businesses characterized by high net margins and relatively low capital intensity.
Verisk aims at creating long-term value through organic growth and better returns on invested capital. The company continuously 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. Verisk recorded an average organic revenue growth of about 8% over the past 10 years.
At the same time, Verisk continues to extend its footprint in new markets, with healthy long-term growth potential, through targeted international expansion. The company recently inked a definitive agreement to acquire Sequel, a premier insurance and reinsurance software specialist based in London, for £250 million. The transaction is likely to close in third-quarter 2017, subject to the fulfilment of mandatory closing conditions and regulatory approvals.
Since its inception in 1933, Sequel has carved a niche for itself in the insurance and reinsurance businesses with an integrated suite of software that provides full end-to-end management of the related services. The strategic acquisition will enable Verisk to strengthen its footprint in the U.K. and further expand its comprehensive offerings to the global complex commercial and specialty insurance industry. With unique software tools, Verisk is likely to gain a key insight of customer’s workflows, facilitating integrated global data analytics through a specialized end-to-end workflow solution. Consequently, the transaction is likely to be a great value addition for Verisk and is expected to be neutral to 2017 adjusted earnings per share while being accretive to 2018 adjusted earnings.
Headwinds
Verisk is susceptible to operational risks related to security breaches in its facilities, computer networks and databases, resulting in a loss of its credibility and/or customers. Data theft and misuse by third-party contractors could also lead to loss of businesses and pose a threat to the company.
The company is also vulnerable to high volatility related to continued end-market headwinds affecting its energy business and environmental health and safety solutions. Verisk has underperformed the industry with an average year-to-date decline of 0.2% as against a gain of 20.9% for the latter.
Moving Forward
Nevertheless, we expect Verisk to witness higher revenues in the future and remain impressed by its focused growth initiatives. Verisk currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include S&P Global, Inc. (SPGI - Free Report) , Intertek Group plc (IKTSY - Free Report) and TransUnion (TRU - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
S&P Global has a solid long-term earnings growth expectation of 12.5%. It topped estimates in each of the trailing four quarters with an average positive earnings surprise of 9.5%.
Intertek Group has a healthy long-term earnings growth expectation of 13%.
TransUnion has a healthy long-term earnings growth expectation of 10%. It beat earnings estimates in each of the trailing four quarters with a positive earnings surprise of 10.6%.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Image: Bigstock
Verisk Poised for Healthy Inorganic Growth Despite Risks
On Sep 5, we issued an updated research report on business services provider, Verisk Analytics, Inc. (VRSK - Free Report) .
Growth Drivers
Using advanced technologies to collect and analyze troves of data, Verisk draws on unique data assets and deep domain expertise to provide predictive analytics and decision support solutions that are integrated into customer workflows. These help its customers to take informed decisions with greater precision, efficiency and discipline about various risks involved in the businesses. In order to create long-term value for its clients, the company has extended its scalable data and analytic solutions by steadily putting resources into overseas markets. The scalability of its products has further led to highly cash-generative businesses characterized by high net margins and relatively low capital intensity.
Verisk aims at creating long-term value through organic growth and better returns on invested capital. The company continuously 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. Verisk recorded an average organic revenue growth of about 8% over the past 10 years.
At the same time, Verisk continues to extend its footprint in new markets, with healthy long-term growth potential, through targeted international expansion. The company recently inked a definitive agreement to acquire Sequel, a premier insurance and reinsurance software specialist based in London, for £250 million. The transaction is likely to close in third-quarter 2017, subject to the fulfilment of mandatory closing conditions and regulatory approvals.
Since its inception in 1933, Sequel has carved a niche for itself in the insurance and reinsurance businesses with an integrated suite of software that provides full end-to-end management of the related services. The strategic acquisition will enable Verisk to strengthen its footprint in the U.K. and further expand its comprehensive offerings to the global complex commercial and specialty insurance industry. With unique software tools, Verisk is likely to gain a key insight of customer’s workflows, facilitating integrated global data analytics through a specialized end-to-end workflow solution. Consequently, the transaction is likely to be a great value addition for Verisk and is expected to be neutral to 2017 adjusted earnings per share while being accretive to 2018 adjusted earnings.
Headwinds
Verisk is susceptible to operational risks related to security breaches in its facilities, computer networks and databases, resulting in a loss of its credibility and/or customers. Data theft and misuse by third-party contractors could also lead to loss of businesses and pose a threat to the company.
The company is also vulnerable to high volatility related to continued end-market headwinds affecting its energy business and environmental health and safety solutions. Verisk has underperformed the industry with an average year-to-date decline of 0.2% as against a gain of 20.9% for the latter.
Moving Forward
Nevertheless, we expect Verisk to witness higher revenues in the future and remain impressed by its focused growth initiatives. Verisk currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include S&P Global, Inc. (SPGI - Free Report) , Intertek Group plc (IKTSY - Free Report) and TransUnion (TRU - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
S&P Global has a solid long-term earnings growth expectation of 12.5%. It topped estimates in each of the trailing four quarters with an average positive earnings surprise of 9.5%.
Intertek Group has a healthy long-term earnings growth expectation of 13%.
TransUnion has a healthy long-term earnings growth expectation of 10%. It beat earnings estimates in each of the trailing four quarters with a positive earnings surprise of 10.6%.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>