Shareholders of Verisk would probably like to forget the past six months even happened. The stock dropped 29.7% and now trades at $213.36. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Verisk, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Is Verisk Not Exciting?
Even with the cheaper entry price, we're cautious about Verisk. Here are two reasons you should be careful with VRSK and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Verisk grew its sales at a sluggish 2% compounded annual growth rate. This was below our standards.
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Verisk’s EPS grew at an unimpressive 7.2% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 2% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
Verisk’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 29× forward P/E (or $213.36 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now. Let us point you toward an all-weather company that owns household favorite Taco Bell.
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