VRSK - Embedded Expectations Analysis - 2020 07 09
Verisk Analytics, Inc. (VRSK:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 35.9x Uniform P/E. At these levels, the market has bullish expectations for the firm, and management is confident about their end market strength, innovation investments, and strategiesSpecifically, management generated an excitement marker when saying that the coronavirus impact on Q1 results was modest. In addition, they are confident customers in each of their 3 vertical markets will generate returns faster when implementing Verisk solutions, and that they continue to manage and deliver core operating leverage. Moreover, they are confident their rate of innovation investment for the future is unabated and that they modestly trimmed and realigned labor headcount. Furthermore, they are confident they are less exposed to upstream oil and gas operations in their WoodMac business and that they have been successful with the progress they have made in the United Kingdom
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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