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Verisk Rides on Data Analysis Expertise, Debt Woes Remain
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Verisk Analytics, Inc. (VRSK - Free Report) stock has rallied 27.8% on a year-to-date basis, outperforming the 11.8% rise of the industry it belongs to.
What’s Driving Verisk Analytics?
Verisk’s expertise in providing predictive data analytics decision by using advanced technologies to collect and interpret different types of data sets is impressive. The company mainly uses advanced technologies such as latest remote sensing and machine learning technologies along with cloud computing. The majority of the technologies used by Verisk are developed, maintained and supported by almost 20% of its employees. Its efforts to stay technologically updated to meet varying client demands and its technical prowess in analytics and Big Data provide Verisk an edge over its competitors.
Higher organic revenue growth through a combination of increase in new customers for existing solutions, cross-sale of its existing solutions to existing customers and the sale of new solutions will help Verisk create long-term value. In the first nine months of 2018, total revenues grew 7% organically and 6.3% on an organic constant-currency basis. This marks an improvement from 2017 when total revenues grew 4.5% organically and 5.3% on an organic constant currency basis.
Moreover, Verisk continues to earn a major portion of its revenues from subscriptions and long-term agreements. In the first nine months of 2018, Verisk’s three reportable segments: Insurance, Energy and Specialized Markets and Financial Services generated a respective 81%, 78% and 72% of revenues from subscriptions and long-term agreements for its solutions.
Acquisitions have also been one of the key growth catalysts for Verisk. The company has been continuously acquiring and investing in companies globally to expand its data and analytics capabilities across industries. In 2018 so far, the company has acquired three companies —Validus-IVC Limited on Jun 20, Business Insight Limited on Feb 21 and Marketview Limited on Jan 5. While the buyout of Validus will help improve and automate the claims settlement process, the other two acquisitions will help Verisk in its predictive analytics and consumer spending analytics decision making.
Risks
Verisk’s balance sheet is highly leveraged. As of Sep 30, 2018, long-term debt was $2.04 billion while cash and cash equivalents was $147.6 million. Such a cash position implies that Verisk needs to generate adequate amount of operating cash flow to service its debt. Also, high debt may limit the company’s future expansion and worsen its risk profile.
Since Verisk’s business model centers on huge amount of data, it remains susceptible to operational risks related to security breaches at its facilities, computer networks, and databases, resulting in loss of its credibility and/or customers. Dependence on external sources for data supply can lead to contractual and pricing issues with data suppliers (some of them are also its rivals).
A few better-ranked stocks in the broader Business Services sector include Paychex, Inc. (PAYX - Free Report) , Genpact Limited (G - Free Report) and WEX Inc. (WEX - Free Report) , each carrying a Zacks Rank #2 (Buy). The long-term expected EPS (three to five years) growth rate for Paychex, Genpact and WEX is 8.5%, 10% and 15%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Verisk Rides on Data Analysis Expertise, Debt Woes Remain
Verisk Analytics, Inc. (VRSK - Free Report) stock has rallied 27.8% on a year-to-date basis, outperforming the 11.8% rise of the industry it belongs to.
What’s Driving Verisk Analytics?
Verisk’s expertise in providing predictive data analytics decision by using advanced technologies to collect and interpret different types of data sets is impressive. The company mainly uses advanced technologies such as latest remote sensing and machine learning technologies along with cloud computing. The majority of the technologies used by Verisk are developed, maintained and supported by almost 20% of its employees. Its efforts to stay technologically updated to meet varying client demands and its technical prowess in analytics and Big Data provide Verisk an edge over its competitors.
Higher organic revenue growth through a combination of increase in new customers for existing solutions, cross-sale of its existing solutions to existing customers and the sale of new solutions will help Verisk create long-term value. In the first nine months of 2018, total revenues grew 7% organically and 6.3% on an organic constant-currency basis. This marks an improvement from 2017 when total revenues grew 4.5% organically and 5.3% on an organic constant currency basis.
Moreover, Verisk continues to earn a major portion of its revenues from subscriptions and long-term agreements. In the first nine months of 2018, Verisk’s three reportable segments: Insurance, Energy and Specialized Markets and Financial Services generated a respective 81%, 78% and 72% of revenues from subscriptions and long-term agreements for its solutions.
Acquisitions have also been one of the key growth catalysts for Verisk. The company has been continuously acquiring and investing in companies globally to expand its data and analytics capabilities across industries. In 2018 so far, the company has acquired three companies —Validus-IVC Limited on Jun 20, Business Insight Limited on Feb 21 and Marketview Limited on Jan 5. While the buyout of Validus will help improve and automate the claims settlement process, the other two acquisitions will help Verisk in its predictive analytics and consumer spending analytics decision making.
Risks
Verisk’s balance sheet is highly leveraged. As of Sep 30, 2018, long-term debt was $2.04 billion while cash and cash equivalents was $147.6 million. Such a cash position implies that Verisk needs to generate adequate amount of operating cash flow to service its debt. Also, high debt may limit the company’s future expansion and worsen its risk profile.
Since Verisk’s business model centers on huge amount of data, it remains susceptible to operational risks related to security breaches at its facilities, computer networks, and databases, resulting in loss of its credibility and/or customers. Dependence on external sources for data supply can lead to contractual and pricing issues with data suppliers (some of them are also its rivals).
Zacks Rank & Stocks to Consider
Verisk currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Business Services sector include Paychex, Inc. (PAYX - Free Report) , Genpact Limited (G - Free Report) and WEX Inc. (WEX - Free Report) , each carrying a Zacks Rank #2 (Buy). The long-term expected EPS (three to five years) growth rate for Paychex, Genpact and WEX is 8.5%, 10% and 15%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>