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Verisk Remains Poised for Growth Despite Inherent Risks


On Feb 12, we issued an updated research report on business services provider, Verisk Analytics, Inc. VRSK.

Using advanced technologies to collect and analyze troves of data, Verisk draws on unique data assets and deep domain expertise to provide predictive analytics and decision support solutions that are integrated into customer workflows. These facilitate its customers to take informed decisions with greater precision, efficiency and discipline about various risks involved in the businesses. In order to create long-term value for its clients, the company has extended its scalable data and analytic solutions by steadily putting resources into overseas markets. The scalability of its products has further led to highly cash-generative businesses characterized by high net margins and relatively low capital intensity.

Verisk offers advanced technologies to capture and interpret imagery, telemetry data, sensory data and other emergent data sets in real time and at scale. At the same time, it provides visualization and consumability with emphasis on geo-location to predict weather patterns in advance. Multivariate regression trees and algorithms to estimate event likelihood and cohort belonging along with simulated Monte Carlo experiments for highly coupled nonlinear systems with wide variability and high underlying betas remain its forte. Such a deep technical prowess for analytics and Big Data provide an unrivalled edge over its competitors. Verisk has outperformed the industry in the last six months with an average return of 15.8% compared with a gain of 9.7% for the latter.

Moreover, Verisk aims to create long-term value through organic growth and better returns on invested capital. The company continuously seeks to expand its portfolio by leveraging its deep knowledge and embedded position to develop new, proprietary data sets and predictive analytics by working with its customers to understand their evolving needs. Verisk recorded an average organic revenue growth rate of about 8% over the past 10 years.

However, Verisk is susceptible to operational risks related to security breaches in its facilities, computer networks and databases, resulting in a loss of its credibility and/or customers. Data theft and misuse by third-party contractors could also lead to loss of businesses and pose a significant threat. The company is also vulnerable to high volatility related to continued end-market headwinds affecting its environmental health and safety solutions.

Nevertheless, we expect Verisk to witness higher revenues in the future and remain impressed by its focused growth initiatives. Verisk has a Zacks Rank #3 (Hold). Other noteworthy stocks in the industry include Exponent, Inc. EXPO, S&P Global Inc. SPGI and Intertek Group plc IKTSY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Exponent has a solid long-term earnings growth expectation of 11.7%. It topped estimates twice in the trailing four quarters with an average positive earnings surprise of 12.4%.

S&P Global has a solid long-term earnings growth expectation of 12.5%. It topped estimates in each of the trailing four quarters with an average positive earnings surprise of 12.8%.

Intertek Group has a healthy long-term earnings growth expectation of 12%.

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