VRSK - Embedded Expectations Analysis - 2020 01 23
Verisk Analytics, Inc. (VRSK:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with a 33.8x Uniform P/E. At these levels, the market has expectations for Uniform ROA to remain stable, but management may have concerns about their transition to cloud computing, Geomni, and pipeline opportunitiesSpecifically, management may be overstating the efficiency and customer-service-related benefits of transitioning to a cloud computing system, and they may be concerned about their core business leverage and new revolving debt agreements. Moreover, they may lack confidence in their investment in Geomni and its ability to improve roof report revenue and provide cost efficiencies. Management may also be exaggerating their pipeline opportunities, the potential of Sequel product suite and EDM launches, and their positioning among disruptive players in their verticals
Verisk Analytics is a data analytics provider serving customers in insurance, energy and specialized markets, and financial services. The company has three segments: Insurance, which provides underwriting and ratings and claims insurance data for the United States property and casualty insurance industry; Energy and Specialized Markets, which provides research and consulting data analytics for the global energy, chemicals, and metals and mining industries; and Financial Services, which provides benchmarking, decisioning algorithms, business intelligence, and customized analytic services to financial institutions, payment networks and processors, alternative lenders, regulators and merchants.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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