About Verisk Analytics
The short and sweet of it is that Verisk Analytics is an insurance platform’s best friend, in more respects than none.
Headquartered in Jersey City, New Jersey, Verisk is a company that is seemingly intent on using data to accurately predict outcomes that enables insurance companies (and a few other related institutions, such as banks and other operators within the financial services realm) to better manage the risk of certain outcomes and thus, manage their own risk within their client’s portfolios.
Verisk is quite a powerful data analytics platform for some of the most important risk management companies and other entities (such as governments) in the world and as mentioned on TD Ameritrade’s platform and its displayed description of the company, Verisk Analytics “offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, and many other fields.”
The paragraph goes on to mention that Verisk’s insurance segment “primarily serves its property and casualty (P&C) insurance customers and focuses on the prediction of loss, the selection and pricing of risk, and compliance with their reporting requirements in each United States state in which the Company operate.”
Yes, there isn’t an “s” included at the end of “operate” when there should be.
Come on, TD Ameritrade.
Nevertheless, it is clear that Verisk Analytics does a lot for the insurance industry and is likely deemed as a great platform through which insurance companies can make their operations more efficient and cash flow generative and at the end of the day, more profitable, perhaps by being more selective with the risks they assume, day in and day out.
In terms of how the company specifically makes its money (i.e., generates its revenues), Verisk offers a wide array of subscription-based packages and services that its clients can indulge in and pay a monthly fee for in order for Verisk to help optimize its risk allocation and other important aspects of one’s insurance business or related entity.
So that is Verisk Analytics in a nutshell.
Now that some of the important groundwork has been established regarding Verisk, its operations and how it makes its money, let’s get on with the analysis portion of this stock analysis article that you’ve been so desperately awaiting.
Verisk’s stock financials
In getting things kicked off, Verisk has a current share price of $223.00 a market capitalization of $32.29 billion along with a prevailing price-to-earnings (P/E) ratio of 48.12 along with an annually distributed dividend of $1.36.
Given this preliminary yet helpful information, it seems as though this company’s stock (NASDAQ: VRSK) is overvalued by a fair amount at the moment, trading well above the generally accepted fair value benchmark of 20, particularly trading over double that figure at the moment, indicating that its stock is objectively overvalued.
While we refuse to let this get us down this early on in the ball game, it is still something we will certainly consider moving forward in our analysis of Verisk Analytics and its stock (NASDAQ: VRSK).
With respect to the general shape and form of the company’s balance sheet, Verisk’s executive team is tasked with managing and taking care of just a smidge below $7 billion in terms of total assets as well as around $5.2 billion in terms of total liabilities.
While the overall structure of this company’s balance sheet may initially seem a bit too total liability-heavy, we find this structure quite logical given the fact that practically any major company operating in the software as a service (SaaS) sector tends to be growing at a rapid rate and thus strapping on some debt in order to finance said growth, which seems to be the case with Verisk Analytics.
Additionally, the company’s total amount of assets are still greater (by a comforting margin, from our vantage point) than its total amount of liabilities, which is in itself a plus for a company that might be growing at a strong pace.
Referring over to the company’s income statement, Verisk’s total annual revenues since 2018 have been steady as could be with its recent year-over-year (YOY) figures typically standing in the low-to-mid $2 billion area code.
Even though there isn’t much growth here in terms of total annual revenues, we will absolutely be noting this consistency, as it implies that this company is doing a fine job at retaining its current customers, with surrounding economic turmoil or not.
Through its SaaS model, Verisk has been able to turn out consistent net income and total cash from operations since 2018 as well, which isn’t necessarily always the case with many other software companies, but it just happens to be the case with this one.
Obviously, this isn’t much of a bad thing at all.
Verisk’s stock fundamentals
Looking through this company’s profitability lens, particularly on a trailing twelve month (TTM) net profit margin basis, Verisk’s, according to the displayed listed figure on TD Ameritrade’s platform isn’t really slightly better than the industry’s listed average, but considerably better.
For instance, the company’s TTM net profit margin is listed as 30.79% to the industry’s respective average of 10.24%, which, again, for a software company is very, very impressive given the competition it more than likely faces.
Lastly, let’s talk briefly about this company’s TTM returns on the fronts of both its assets and investments.
Also according to TD Ameritrade’s platform, Verisk’s are both larger than that of the industry’s listed averages as well, which heavily implies that it is doing an excellent job at properly and strategically deploying its available capital and making the most out of the investments it has implemented over time.
Should you buy Verisk stock?
Verisk Analytics surely has a lot going for itself.
With year-over-year consistency in terms of its total annual revenue figures, its towering TTM net profit margin, its strong comparable TTM returns on assets and investments, its formidable presence in the risk management and insurance sector(s), the only major qualm we maintain with this company is one that it largely cannot control; its currently elevated, to us, unjustified valuation.
Given that its current price-to-earnings ratio screams that this company’s stock is trading way above its intrinsic, fair value, we just aren’t thrilled enough and really don’t feel compelled enough to put money behind a company with its revenues floating at just about the same amount each year (over the last five years, at least).
If this company’s stock was trading a lot closer to fair value, say, at a price-to-earnings ratio of 20 or even 25 for that matter, we would be a lot more interested in the prospects of getting in on this company’s stock (NASDAQ: VRSK), however, reality is reality and we just can’t go around breaking our own rules and must remain strong in the best interest of one of our core tenants; objectivity.
In the interest of objectivity, we give this company’s stock a “hold” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.