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Here's Why Investors Should Hold on to Verisk (VRSK) Stock

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Shares of Verisk Analytics, Inc. (VRSK - Free Report) have gained 7.6% in the past year against 4.3% decline of the Zacks S&P 500 composite.

The company has an expected long-term earnings per share (three to five years) growth rate of 10.9%. Further, earnings are anticipated to register 11.6% growth in 2020 and 10.5% in 2021.

Factors That Bode Well

Verisk continues to witness higher organic revenue growth through a combination of increase in new customers for existing solutions, cross-sale of its existing solutions to customers and the sale of new solutions. The company recorded revenue growth of 5.4% in the fourth quarter of 2019.

Verisk recently expanded its new InsurTech solution — OneXperience — into commercial insurance to help insurers conduct underwriting process of commercial properties quickly and more accurately with the help of digitization. We believe, the move will help the company strengthen its Insurance segment, which serves property and casualty (P&C) insurance customers. The segment’s revenues were up 7.5% year over year on a reported basis and 5.2% on organic constant currency basis in the fourth quarter of 2019.

We are impressed with Verisk’s consistent record of rewarding its shareholders. In 2019, the company repurchased shares worth $300 million and paid out $163.5 milion in dividends. In 2018, 2017 and 2016, the company had repurchased shares worth $438.6 million, $276.3 million and $326.8 million, respectively. Such moves indicate the company’s commitment to boost value for shareholders and underline its confidence in its business.

Risks Associated

In spite of significant growth prospects, Verisk is not immune to headwinds. The company has a debt-laden balance sheet. As of Dec 31, 2019, long-term debt was $2.65 billion while cash and cash equivalents were $184.6 million. High debt may limit the company’s future expansion and worsen its risk profile.

Zacks Rank and Stocks to Consider

Verisk carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are CoreLogic, Inc. , Elastic N.V. (ESTC - Free Report) and Blucora, Inc. . All the stocks carry 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 CoreLogic, Elastic and Blucora are 11%, 26% and 20%, respectively.

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