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Why You Should Retain Verisk Analytics (VRSK) Stock for Now

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Verisk Analytics, Inc. (VRSK - Free Report) is currently benefiting from strong organic revenue growth and acquisitions. The stock has gained 16.8% year to date, underperforming the 13.6% rally of the industry it belongs to.

With an expected long-term EPS growth rate of 10.2% and a market cap of $20.8 billion, Verisk seems to be a stock that investors should retain in their portfolio for now.

Factors That Bode Well

Verisk Analytics provides predictive data analytics decision by using advanced technologies to collect, interpret and analyze different types of data sets in real time and at scale. It mainly uses technologies such as the latest remote sensing and machine learning technologies along with cloud computing, which primarily drive its business. Deep technical prowess for analytics and Big Data provide it an unrivalled edge over competitors.

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

Verisk Analytics, Inc. Revenue (TTM)

Acquisitions have also been a growth catalyst for Verisk. The company has been continuously acquiring and investing globally to expand its data and analytics capabilities across industries. In 2018, the company acquired four companies — Rulebook, Validus-IVC, Business Insight and Marketview. While Rulebook strengthens Verisk's position in the global insurance market, Validus helps to improve and automate the claims settlement process. The other two acquisitions help Verisk in its predictive analytics and consumer spending analytics decision making.

Wrapping Up

In spite of significant growth prospects, Verisk is not free from headwinds. It has a debt-laden balance sheet that may limit future expansion and worsen the risk profile. As of Dec 31, 2018, long-term debt was $2.05 billion, while cash and cash equivalents were $139.5 million.

Moreover, as Verisk’s business model centers on a huge amount of data, the company remains susceptible to security breaches. Nevertheless, we believe that Verisk’s expanding data and analytics capabilities across industries bode well in the long term.

Zacks Rank & Other Stocks to Consider

Currently, Verisk carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are Omnicom (OMC - Free Report) , Paychex (PAYX - Free Report) and Automatic Data Processing (ADP - 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.

Long-term expected EPS (three to five years) growth rate for Omnicom, Paychex and Automatic Data Processing is 6.9%, 8.8% and 12.8%, respectively.

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