Acquisitions Benefit Verisk Analytics Amid Liquidity Concerns

Verisk Analytics, Inc. VRSK has had an impressive run over the past year. The company’s shares have surged 28.3% against the 13.1% decline of its industry and the 7.7% fall of the Zacks S&P 500 Composite.

VRSK reported impressive fourth-quarter 2024 results. Both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings (excluding 12 cents from non-recurring items) were $1.61 per share, surpassing the Zacks Consensus Estimate by 0.6% and growing 15% from the year-ago quarter. Total revenues of $735.6 million beat the consensus estimate marginally and increased 8.6% on a year-over-year basis.

How is Verisk Analytics Performing?

In 2024, subscription revenues represented nearly 81% of total revenues and have remained in line with the preceding year. VRSK has been increasing prices during the renewal of contracts, leading to higher annualized recurring revenues. Transitioning VRSK’s business model from transactions to subscriptions benefits its recurring revenues since subscription fees are usually paid in advance of providing the services, either quarterly or in full, upon commencement of the subscription period.

Acquisitions play a significant role in Verisk Analytics’ growth strategy, and it consistently invests in global companies to improve data and analytics capabilities. In 2024, the company acquired Rocket Enterprise Solutions GmbH (Rocket) for a cash purchase price of $10.1 million. The buyout will facilitate the company’s European expansion and the company's target to help insurers and claims service providers leverage more data and tools to augment claims experience.

The April 2023 Krug buyout expanded the company's claims and casualty services across Europe. Mavera, a technology and analytics partner to VRSK, was acquired in February 2023 to expand the company’s footprint in the European region and support continuous growth in the global insurance industry.

In 2024, the company paid $221.3 million in dividends and repurchased shares worth $1 billion. In 2023, Verisk Analytics paid $196.8 million in dividends and repurchased shares worth $2.8 billion. In 2022, VRSK paid $195.2 million in dividends and repurchased shares worth 1.7 billion. Steadily increasing shareholder returns has the effect of boosting share prices as investors increasingly look for returns in unstable or uncertain markets. The fact that its shares are up 28.3% in the trailing 12-month period is a testament to this strategy’s effectiveness.

Meanwhile, Verisk Analytics’ personnel expenses are a major component of both the cost of revenues and selling, general, and administrative expenses. Nearly 26% and 57% of the total operating expenses for 2024 and 2023, respectively, were represented by personnel expenses. As the company grows, the number of employees will increase. Furthermore, hiring will increase to tackle a higher attrition rate. Although personnel expenses are higher for companies operating in the information industry, rising employee salaries and wage expenses will significantly pressure VRSK’s bottom line.

VRSK's current ratio, a measure of liquidity, at the end of the fourth quarter of 2024 was 0.74, lower than the industry average of 0.8. A current ratio of less than 1 often indicates that a company may have difficulties in paying off its short-term obligations.

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Verisk Analytics’ Zacks Rank & Stocks to Consider

VRSK carries a Zacks Rank #3 (Hold) at present.

Some better-ranked stocks in the broader Zacks Business Services sector are Cintas Corporation CTAS and WNS (Holdings) Limited WNS.

Cintas Corporation carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CTAS has a long-term earnings growth expectation of 12%. It delivered a trailing four-quarter earnings surprise of 7.6%, on average.

WNS (Holdings) Limited carries a Zacks Rank of 2 at present. It has a long-term earnings growth expectation of 7.2%.

WNS delivered a trailing four-quarter earnings surprise of 6.1%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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