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Verisk Analytics Inc(VRSK-Q)

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Why Verisk Analytics Stock Jumped 12.1% in March

Motley Fool - Fri Apr 7, 2023

What happened

Verisk Analytics (NASDAQ: VRSK) had a good month as its stock price rose 12.1% in March, according to S&P Global Market Intelligence. The stock is trading at around $190 per share as of April 7, up 7.9% year to date.

The stock outperformed the major market indexes, which were all up in March, with the S&P 500 and the Nasdaq Composite climbing 3.5% and the Dow Jones Industrial Average rising 1.9%.

So what

Verisk Analytics is a research, consulting, and analytics firm for the insurance industry. Veriskʻs stock price surged early in the month of March after it reported strong fourth-quarter and year-end earnings on Feb. 28, beating earnings and revenue estimates.

Revenue was flat in the quarter at $630 million year over year, but it was up 8.1% on an organic constant currency (OCC) basis, which excludes the impact of fluctuations in the foreign currency exchange rates. Meanwhile, income from operations spiked 82% year over year to $216 million, while diluted earnings per share climbed 88% to $1.37. The sharp income increase was primarily due to a $134 million impairment charge in the fourth quarter of 2021.

But adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was up 4.1% year over year and 12.9% on an OCC basis to $332 million. Also, free cash flow increased 64% to $169 million in the quarter.

Several analyst upgrades followed the earnings report in the days after. Among them, Baird raised its price target to $206 per share from $201. Baird analyst Jeffrey Meuler was bullish on its recent divestitures, including Wood Mackenzie in February, allowing it to reinvest and grow its core insurance consulting business.

Lee Shavel, president and CEO of Verisk, called it a "significant transformation of Verisk," as the company is returning to its roots as a data analytics and technology partner to the global insurance industry.

Now what

Verisk issued guidance for 2023 and expects earnings and revenue growth this year. The company projects annual revenue to increase to between $2.59 billion and $2.63 billion, up from $2.44 billion in 2022. Adjusted EBITDA is anticipated to be in the range of $1.37 billion to $1.42 billion versus $1.27 billion in 2022. It also anticipates increasing its EBITDA margin to 53% to 54%, up from 52% in 2022.

Further, the outlook calls for spending $200 million to $230 million in capital expenditures to invest in its growth. Verisk officials also announced plans to buy back $2.5 billion of the company's stock in 2023.

The company is trading at about 32 times earnings, down from over 50 a year ago. Given recent moves, there is a lot to like here, so it might be a stock to keep on your radar.

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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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