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Verisk Buys PowerAdvocate to Boost Energy Sector Presence


Verisk Analytics, Inc. VRSK recently inked an agreement to acquire PowerAdvocate for $200 million in order to augment its presence in the energy sector. PowerAdvocate internationally caters to the energy sector by providing market, cost intelligence and supply chain solutions, mitigating risk and optimizing total cost of production.

PowerAdvocate offers key insights into customer’s cost-saving opportunities by analyzing spend and cost data obtained from millions of transactions across thousands of services, materials and equipment categories in the energy industry. With its wide range of proprietary data, this enables companies to bring transparency in the market and ensure that capital is utilized efficiently.

How the Deal will Benefit the Companies

As Verisk draws on unique data sets to provide predictive analytics and decision support solutions to customers in rating, it is expected to benefit immensely from this acquisition. The company, with its decision support solutions, has facilitated its customers to take informed decisions with greater precision, efficiency and discipline about various risks involved in business. This buyout will bring more enterprises in the energy sector within Verisk’s reach by adding PowerAdvocate’s spend data and cost models.

The deal will add to Verisk’s existing pool of customers, giving it greater access to the global markets. Verisk with PowerAdvocate’s proprietary data set, encompassing $2.7 trillion of spending data and machine-learned methods, will provide customers with unique insight to increase profitability. Verisk’s revenues are likely to increase significantly as a result of this acquisition, providing greater market strength.

PowerAdvocate’s 2017 revenues, which are expected to be around $36 million, are likely to increase at much higher rate than Verisk’s historical average organic annual growth rate of 7-8%. Its estimated EBITDA is expected to be $11 million. Additionally, Verisk is anticipating an attractive return excess of its cost of capital from this acquisition.

Verisk has underperformed the industry in a year with a gain of 17.3% compared with a rally of 26.6% for the latter. With such strategic acquisitions, the company expects to gradually improve its future performance.

Zacks Rank & Stocks to Consider

Verisk currently has the Zacks Rank # 3 (Hold). Some better-ranked stocks in the space are FactSet Research Systems Inc. FDS, S&P Global Inc. SPGI and TransUnion TRU each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FactSet Research has a long-term earnings growth expectation of 10.8 %. It topped earnings estimates in each of the trailing four quarters with an average positive surprise of 1.14%.

S&P Global has a long-term earnings growth expectation of 12.5%. It topped earnings estimates in each of the trailing four quarters with an average positive surprise of 11.11%.

TransUnion has a long-term earnings growth expectation of 10.0%. It topped earnings estimates in each of the trailing four quarters with an average positive surprise of 10.25%.

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