Verisk (VRSK)

Insurance data analytics provider Verisk Analytics (NASDAQ:VRSK) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 7% year on year to $753 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $3.06 billion at the midpoint. Its non-GAAP profit of $1.73 per share was 2.8% above analysts’ consensus estimates.

Company Overview

Processing over 2.8 billion insurance transaction records annually through one of the world's largest private databases, Verisk Analytics (NASDAQ:VRSK) provides data, analytics, and technology solutions that help insurance companies assess risk, detect fraud, and make better business decisions.

A combination of increasing reliance on data and analytics across various industries and the desire for cost efficiency through outsourcing could mean that companies in this space gain. As functions such as payroll, HR, and credit risk assessment rely on more digitization, key players in the data & business process services industry could be increased demand. On the other hand, the sector faces headwinds from growing regulatory scrutiny on data privacy and security, with laws like GDPR and evolving U.S. regulations potentially limiting data collection and monetization strategies. Additionally, rising cyber threats pose risks to firms handling sensitive personal and financial information, creating outsized headline risk when things go wrong in this area.

Verisk's competitors include S&P Global (NYSE:SPGI), Moody's Analytics (NYSE:MCO), CoreLogic, LexisNexis Risk Solutions (part of RELX Group, NYSE:RELX), and Guidewire Software (NYSE:GWRE), all of which provide various data analytics and risk assessment solutions to the insurance and financial services industries.

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $2.93 billion in revenue over the past 12 months, Verisk is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Verisk’s 1.9% annualized revenue growth over the last five years was sluggish. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Verisk’s annualized revenue growth of 5.4% over the last two years is above its five-year trend, suggesting some bright spots.

This quarter, Verisk grew its revenue by 7% year on year, and its $753 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, similar to its two-year rate. This projection is above average for the sector and suggests its newer products and services will fuel better top-line performance.

Verisk has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average operating margin of 42.5%.

Looking at the trend in its profitability, Verisk’s operating margin rose by 6.8 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Verisk generated an operating profit margin of 43.8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Verisk’s EPS grew at a decent 8.3% compounded annual growth rate over the last five years, higher than its 1.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Verisk’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Verisk’s operating margin was flat this quarter but expanded by 6.8 percentage points over the last five years. On top of that, its share count shrank by 15%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q1, Verisk reported EPS at $1.73, up from $1.63 in the same quarter last year. This print beat analysts’ estimates by 2.8%. Over the next 12 months, Wall Street expects Verisk’s full-year EPS of $6.75 to grow 7.1%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Verisk has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging an eye-popping 30.7% over the last five years.

Taking a step back, we can see that Verisk’s margin expanded by 1.7 percentage points during that time. This is encouraging because it gives the company more optionality.

Verisk’s free cash flow clocked in at $391 million in Q1, equivalent to a 51.9% margin. This result was good as its margin was 6.9 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Verisk hasn’t been the highest-quality company lately because of its poor top-line performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 26.3%, splendid for a business services business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Verisk’s ROIC has increased significantly over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Verisk reported $1.11 billion of cash and $3.94 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.61 billion of EBITDA over the last 12 months, we view Verisk’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $57.9 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Verisk beat analysts’ EPS expectations this quarter. On the other hand, its full-year EPS guidance slightly missed and its full-year revenue guidance was in line with Wall Street’s estimates. Both full-year revenue and EPS guidance remained unchanged from what the company previously provided. Overall, this quarter didn't feature many surprises good or bad. The stock remained flat at $298.50 immediately following the results.

Updated: July 11, 2025 at 12:12 AM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Verisk.

Verisk isn’t a terrible business, but it doesn’t pass our bar. To begin with, its revenue growth was weak over the last five years.

Verisk’s P/E ratio based on the next 12 months is 41.9x. This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $306.32 on the company (compared to the current share price of $302.82).