Verisk Analytics Inc Valuation – March 2019 #VRSK

Company Profile (excerpt from Reuters): Verisk Analytics, Inc., incorporated on May 23, 2008, is a data analytics provider serving customers in insurance, natural resources and financial services. The Company operates through two segments: Risk Assessment and Decision Analytics. Its Risk Assessment segment serves its property and casualty (P&C) insurance customers and focuses on prediction of loss, selection and pricing of risk, and compliance with their reporting requirements in each United States state in which they operate. In the Decision Analytics segment, the Company develops predictive models to forecast scenarios and produce both standard and customized analytics that help its customers manage their businesses, including predicting loss, selecting and pricing risk, detecting fraud before and after a loss event, and quantifying losses. The Company offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, natural resources intelligence, economic forecasting, and various other fields. In the United States, and around the world, the Company enables customers protect people, property, and financial assets. These solutions take various forms, including data, expert insight, statistical models and analytics all designed to allow its customers to make logical decisions. The Company also works with a range of companies, governments and institutions across the energy, and metals and mining value chains. The Company uses its data assets to develop predictive analytics and transformative models for its customers.


Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSK – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,005,247,318 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.49 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 129.90% Pass
6. Moderate PEmg Ratio PEmg < 20 34.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.38 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.49 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.99 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $3.70
MG Growth Estimate 8.09%
MG Value $91.38
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $53.67
MG Value based on 0% Growth $31.46
Market Implied Growth Rate 13.10%
Current Price $128.47
% of Intrinsic Value 140.58%

Verisk Analytics, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.4 in 2015 to an estimated $3.7 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.1% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Verisk Analytics, Inc. revealed the company was trading above its Graham Number of $34.88. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.71, which was above the industry average of 32.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.03.

Verisk Analytics, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.03
Graham Number $34.88
PEmg 34.71
Current Ratio 0.49
PB Ratio 10.38
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $644,500,000
Total Current Liabilities $1,324,600,000
Long-Term Debt $2,031,000,000
Total Assets $5,900,300,000
Intangible Assets $4,589,300,000
Total Liabilities $3,829,700,000
Shares Outstanding (Diluted Average) 167,347,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.30
Dec2018 $3.56
Dec2017 $3.29
Dec2016 $3.45
Dec2015 $3.01
Dec2014 $2.37
Dec2013 $2.02
Dec2012 $1.92
Dec2011 $1.63
Dec2010 $1.30
Dec2009 $0.70
Dec2008 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.70
Dec2018 $3.31
Dec2017 $3.07
Dec2016 $2.82
Dec2015 $2.40
Dec2014 $2.02
Dec2013 $1.73
Dec2012 $1.48
Dec2011 $1.14
Dec2010 $0.79
Dec2009 $0.45
Dec2008 $0.28

Recommended Reading:

Other ModernGraham posts about the company

Verisk Analytics Inc Valuation – June 2018 $VRSK
Verisk Analytics Inc Valuation – Initial Coverage $VRSK

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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