Verisk Analytics (Verisk Analytics Stock Quote, Chart, News NASDAQ:VRSK) has been on fire over the past six months but while there’s likely upside to come, David Fingold of Dynamic Funds says investors could do better.
“We have owned Verisk and I have recommended it before but we don't presently own it,” said Fingold, vice-president and senior portfolio manager at Dynamic, who spoke on BNN Bloomberg on Monday. “It has done well recently and it’s a company that I like and we watch very carefully.”
“Their primary business is as a supplier of information to the insurance industry. They help insurance companies price insurance and also to do the claims management process,” Fingold said. “Their clients really don't have a lot of choice about using them —none of them are large enough to have the amount of data that's necessary for those processes.”
“They also have a business that could do better in the future, which provides information on oil and gas reservoirs. That would be a source of cyclical upside if that industry gets better,” he said.
New Jersey-based Verisk has been public for a decade and has returned generously to early investors. Since a splashy debut in 2009, the stock has ballooned 600 per cent, with much of that growth coming in the last few years.
A serial acquirer, Verisk has made a number of big purchases over the years, including buying energy sector consultancy business Wood Mackenzie in 2015 for $2.8 billion. The company delved further into utilities and oil and gas via Boston-based PowerAdvocate in 2017.
Verisk has been able to prosper even during the COVID-19 pandemic, as displayed in its latest quarterly report, its Q2 delivered in early August. The company managed to grow revenue year-over-year for the period ended June 30, from $652.6 million last year to $678.8 million, while adjusted EBITDA saw an even larger bounce, going from $304.1 million in Q2 2019 to $348.3 million this year.
The company beat analysts’ estimates on earnings for the quarter, coming in at adjusted EPS of $1.29 per share versus the Zacks consensus estimate of $1.18 per share.
CEO and president Scott Stephenson said the results speak to the strength of the business. “Our second quarter results reflect the enduring strength and stability of our business model and the laser focus of our over 9,000 Verisk teammates on delivering for our customers as they face new challenges in this environment,” Stephenson wrote in a press release. “Our long-term objectives are unchanged. We remain committed to offering a great customer experience, protecting the health and well-being of our teammates, and continuing to drive our innovation agenda.”
For the time being, though, Fingold is wary of Verisk, saying, “The reason why we don't own it now is simply because we have better ideas. It falls within industrials and it’s technically a commercial service and it's a business that has some upside through the energy space but it’s a relatively resilient business.”
“We’ve wanted to get involved where there was more upside in an improving economy,” he said.