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Shares of Verisk Analytics, Inc. VRSK have gained 37% over the past year, significantly outperforming 7.5% rally of the industry it belongs to and 16.7% growth 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 15.5% growth in 2020 and 8.4% in 2021.
Factors Behind the Rally
Verisk has a robust growth strategy that focuses on organic growth, product development and acquisitions. This strategy has enabled the company to grow its revenues at a compound annual growth rate of 10.3% over the past five years. The company continues to invest in people, data sets, analytic solutions, technology and complementary businesses with a view to keep itself updated with changing requirements in the markets it serves. The company is maintaining its focus on increasing solution penetration with customers, developing new proprietary data base and predictive analytics, and expanding in to new customer sectors.
Verisk has developed several advantages for itself that help strengthen its client base and fend off competition. Using advanced technologies to collect and analyze 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. Specialized and in-depth knowledge in markets such as energy, insurance, financial services and risk management adds value to its analytics. Steady stream of first-to-market innovations and the ability to deeply integrate into customer workflows allows the company to strengthen its client base over time. All these initiatives augur well for long-term growth and stability of the company.
Verisk has a debt-laden balance sheet. Total debt at the end of third-quarter 2020 was $3.16 billion, compared with $3.14 billion at the end of the prior quarter. Total-debt-to-total-capital ratio of 0.59 is higher than the industry’s 0.57. A high debt-to-capitalization ratio indicates higher risk of insolvency in challenging times.
Further, the company’s cash and cash equivalent of $222 million at the end of the third quarter was well below this debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. Also, the cash level can’t meet the short-term debt of $460 million.
Zacks Rank and Stocks to Consider
Verisk currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Republic Services RSG, Gartner IT and Insperity NSP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
Long-term earnings (three to five years) growth rate for Republic Services, Gartner and Insperity is estimated at 9.4%, 13.5% and 15%, respectively.
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