Verisk Analytics is a great investment, this investor says

Verisk Analytics (Verisk Analytics Stock Quote, Chart, News, Analysts, Financials NASDAQ:VRSK) has come a long way in its ten-plus years as a public company, but investors shouldn’t be wary of those share price gains as this company has a huge runway ahead of it. So says portfolio manager Brett Girard of Liberty International Investment.

“I think Verisk is a great company to invest in,” says Girard, chief financial officer at Liberty, who spoke on BNN Bloomberg on Monday. “We bought this back in the beginning of 2019 and we continue to hold it to this day.”

New Jersey-based Verisk is in its 50th year as a predictive analytics business, with the company now boasting over 70 per cent of Fortune 100 companies using its solutions to handle risk assessment. The company has segments in Insurance, Energy and Specialized Markets and Financial Services, with its subscription-based services covering fields such as insurance underwriting and claims, fraud, regulatory compliance, natural resources, catastrophes, economic forecasting, geopolitical risks and ESG themes.

“They’re in the data analytic space, and what they’re doing is they’re helping the actuaries that work at insurance companies figure out how better to price risk. And that’s a really important thing going forward because in the past it’s sort of been statistical tables and a lot of work that was by hand or manually done within calculations of databases and things like that,” Girard said.

“But with Verisk, they’re really taking this to the next level and they’re using new technologies. They’re using artificial intelligence to sort through the big data and they’re doing a great job at it,” Girard said. “Not only do they have exposure to the insurance space but they’re also in the financial space and the oil and gas space.”

Verisk has seen its share price steadily head northwards over the past decade since a blockbuster IPO in 2009, going from $27 per share to as high as $207 by late last year. The stock finished 2020 up 39 per cent but is currently down 13 per cent for 2021.

But Girard sees more growth for the stock as Verisk rides the wave of digital transformation and AI-inspired analytics currently taking place across all industries.

“I think going forward, if you believe that having more data is going to allow companies and individuals to make better decisions, which we do, Verisk is a great way to play that,” Girard said.

“It’s something that you could hold onto for a long period of time, given the tailwinds of this big data migration that we’re seeing,” he said.

With the majority of its revenues coming from subscriptions and manifesting in long-term contracts, Verisk has sailed through the COVID-19 pandemic with relative ease. The company reported its fourth quarter and full year 2020 financials in February where it hit $713 million in Q4 revenue, up 5.4 per cent year-over-year, and $344.0 million in adjusted EBITDA, up 7.9 per cent year-over-year. (All figures in US dollars.)

Excluding items, the company’s fourth quarter adjusted earnings came to $1.27 per share whereas analysts had on average been expecting $1.30 per share.

The 2020 year saw revenues climb 6.8 per cent to $2.785 billion and adjusted EBITDA jump a full 12.4 per cent to $1.377 billion. By segment, Insurance revenue grew by 6.5 per cent over the year to $1.986 billion, Energy and Specialized Markets grew by 13.8 per cent to $641.6 million and Financial Services decreased by 12.0 per cent to $156.7 million. The drop in Financial Services revenue was attributed to pandemic-related lower levels of project spend by Verisk’s bank customers.

“Despite the broader economic challenges the pandemic continues to present, Verisk delivered another year of strong organic constant currency revenue and adjusted EBITDA growth in 2020,” said president and CEO Scott Stephenson in a February 23 press release.

“These results demonstrate the resiliency and stability of our business model, the valuable impact of our technology and insights to customers, and the commitment of our more than 9,000 Verisk teammates to support our customers through an unprecedented period of digital transformation,” Stephenson said.

This year’s pullback in Verisk has made for a buying opportunity, according to Deutsche Bank analyst Ashish Sabadra who in early March raised his rating from “Hold” to “Buy” on the stock with a $196 price target, which at the time of publication represented a projected 12-month return of 17 per cent.

Sabadra said now is an “attractive buying opportunity” on Verisk, which he said has a commanding market position in defensive end markets along with secular tailwinds in digitization.

On Monday, Morgan Stanley kept its “Overweight” rating on Verisk but dropped its target from $216 to $201, implying a 12-month return of 12.5 per cent.