Verisk Analytics, Inc. (VRSK - Free Report) is benefitting from a strong data analytics suite and strategic buyouts that are providing long-term growth and stability.
Shares of the company have gained 28.2% in a year’s time compared with the industry’s rise of 8.6%. With expected long-term earnings per share (EPS) growth rate of 11.7% and a market cap of $19.9 billion, it is a stock that investors should retain in their portfolios now.
Let’s take a look at the factors that bode well for the company.
Acquisitions: A Key Growth Strategy
Acquisitions are as one of the key growth catalysts for Verisk. The company has been consistently acquiring and investing in companies globally to expand data and analytics capabilities across industries. So far in 2018, Verisk has acquired three companies —Validus-IVC Limited, Business Insight Limited and Marketview Limited. 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.
From 2015-2017, the company completed 21 acquisitions. Internally, the company is focused on evaluating and integrating acquisitions that are valuable for shareholders.
Use of Advanced Technologies to Aid Predictive Data Analytics Decision
Verisk extracts unique data assets and deep domain expertise to provide predictive data analytics as well as decision support solutions in real time and at scale through advanced technologies. The company primarily uses technologies like the latest remote sensing and machine learning technologies along with cloud computing, which drive the business. A major portion of the technologies used by Verisk is developed, maintained and supported by almost 20% of employees. Moreover, the company’s efforts to stay technologically updated to meet varying customer and client demands are impressive. Such a deep technical prowess for analytics and Big Data provide it an unrivalled edge over competitors.
Consistent Rewards to Shareholders
Verisk’s consistent efforts of returning value to shareholders in the form of share repurchases are positives. In the first nine months of 2018, Verisk repurchased 2,574,123 shares of common stock for an aggregate price of $$282.2 million. The company’s board of directors has authorized up to $3.3 billion since the initiation of share repurchase plan in May 2010, which includes an additional authorization of $500 million approved on May 16, 2018.
In 2017, 2016 and 2015, the company repurchased shares worth $276.3 million, $326.8 million and $20.4 million, respectively. This move indicates the company’s commitment to create value for shareholders and underline investors’ confidence in its business.
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 risk profile. As of Sep 30, 2018, long-term debt was $2.04 billion while cash and cash equivalents were $147.6 million. Moreover, consolidation of huge amount of data by the company’s business model makes it susceptible to operational risks. Nevertheless, we believe that Verisk’s business strategy of pursuing growth on the back of acquisitions bode well in the long term.
Zacks Rank & Stocks to Consider
Currently, Verisk 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 Zacks Business Services sector are WEX Inc. (WEX - Free Report) , Total System Services, Inc. (TSS - Free Report) and Paychex, Inc. (PAYX - Free Report) , each carrying a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for WEX, Total System Services and Paychex is 15%, 14.2%, and 8.5%, respectively.
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