VRSK - Embedded Expectations Analysis - 2021 01 06
Verisk Analytics, Inc. (VRSK:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 41.2x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about each segment's growth, insurtech clients, and the coronavirus impactSpecifically, management may lack confidence in their ability to grow each segment and further expand Verisk Data Exchange's penetration. In addition, they may be exaggerating the synergies gained from acquisitions, the potential of the Lens platform, and a Software as a Service (SaaS) business model. Furthermore, management may lack confidence in their ability to attract insurtech clients and continue improving the customer experience. Finally, they may be concerned about the coronavirus's impact on the business and clients, pricing changes, and compensation costs
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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