VRSK - Embedded Expectations Analysis - 2020 03 26
ï€ Verisk Analytics, Inc. (VRSK:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) Earnings, with a 30.8x Uniform P/E. Even at these levels, the market has somewhat bearish expectations, but management is confident about their growth opportunities, their Genscape and FAST acquisitions, and their migration to cloudï€ Specifically, management is confident that they had organic revenue growth of 6.9%, that their customers' drive towards automation brings them increased opportunities, and that the sale of their compliance background screening business allows them to access important data sets in a more capital efficient manner. In addition, they are confident that the integrations of Genscape and FAST are on track, with respect to everything from costs to sales, and that FAST offers a flexible policy administration system without large upfront capital commitments. Moreover, they are confident that their multi-cloud strategy aligns their migration approach with customer requirements, that their migration to cloud has the full support of customers, and that their retirement of premise dimensions will occur in chunks. Finally, they are confident in their ability to grow EBITDA margin in excess of their revenue growth
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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