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Shares of Verisk Analytics, Inc. VRSK have gained 35.8% in the past year compared with 2.4% rally of the industry it belongs to.The company has an expected long-term earnings per share (three to five years) growth rate of 10.7%.
Factors That Bode Well
Verisk continues to witness higher organic revenue growth on increase in new customers for existing solutions, cross-sale of its existing solutions to customers at present, and also the sale of new solutions. In the third quarter of 2020, revenues of $702.7 million increased 7.6% year over year on a reported basis and 3.6% on an organic constant-currency basis.
Acquisitions have been one of the key growth catalysts for Verisk. The company is continuously acquiring and making investments to expand its data and analytics capabilities across industries. The 2020 acquisition of Franco Signor strengthened the company’s foothold in the Medicare space. Recently on Dec 15, the company has also been in news to have entered into an agreement to acquire Jornaya, a leading provider of consumer behavioural data and intelligence.
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 capitalization ratio of 0.59 is higher than the industry’s 0.57. An increase in 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 Key Picks
Verisk currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Republic Services RSG, Gartner, Inc. IT and NV5 Global NVEE. All the stocks carry a Zacks #2 Rank (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
The long-term expected earnings per share (three to five years) growth rate for Republic Services, Gartner and NV5 Global 9.4%, 13.5% and 16.8%, respectively.
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