Verisk Analytics Stock at Support Zone – Bargain or Trap?
Verisk Analytics (VRSK) stock should be on your watchlist. Here is why – it is currently trading in the support zone ($223.05 – $246.53), levels from which it has bounced meaningfully before. In the last 10 years, Verisk Analytics stock received buying interest at this level 3 times and subsequently went on to generate 20.0% in average peak returns.
| Peak Return | Days to Peak Return | |
|---|---|---|
| 7/14/2023 | 8.8% | 62 |
| 11/2/2023 | 9.2% | 97 |
| 4/5/2024 | 42.0% | 425 |
But is the price action enough alone? It certainly helps if the fundamentals check out. For VRSK Read Buy or Sell VRSK Stock to see how convincing this buy opportunity might be.
Single stock can be risky, but there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Trefis works with Empirical Asset Management – a Boston area wealth manager – whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Here are some quick data points for Verisk Analytics that should help decision:
- Revenue Growth: 7.6% LTM and 10.0% last 3 year average.
- Cash Generation: Nearly 34.2% free cash flow margin and 43.9% operating margin LTM.
- Recent Revenue Shocks: The minimum annual revenue growth in last 3 years for VRSK was 7.6%.
- Valuation: VRSK stock trades at a PE multiple of 35.8
- Opportunity vs S&P: Compared to S&P, you get higher valuation, higher revenue growth, and better margins
For quick background, Verisk Analytics provides predictive analytics and decision support solutions across insurance, energy, and financial services, including benchmarking, decision algorithms, and customized analytics for financial institutions and payment networks.
| VRSK | S&P Median | |
|---|---|---|
| Sector | Industrials | – |
| Industry | Research & Consulting Services | – |
| PE Ratio | 35.8 | 24.1 |
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| LTM* Revenue Growth | 7.6% | 5.2% |
| 3Y Average Annual Revenue Growth | 10.0% | 5.3% |
| Min Annual Revenue Growth Last 3Y | 7.6% | -0.1% |
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| LTM* Operating Margin | 43.9% | 18.7% |
| 3Y Average Operating Margin | 43.3% | 17.8% |
| LTM* Free Cash Flow Margin | 34.2% | 13.3% |
*LTM: Last Twelve Months
What Is Stock-Specific Risk If The Market Crashes?
That said, VRSK isn’t immune to big drops. It fell about 17% in the 2018 correction, nearly 30% during the Covid pandemic, and just over 30% in the inflation shock. Even with strong fundamentals, these dips show the stock can take a hit when markets turn volatile. Solid businesses help, but sudden shocks still ripple through most names.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.