Over the past six months, Verisk has been a great trade. While the S&P 500 was flat, the stock price has climbed by 10.3% to $291.53 per share. This run-up might have investors contemplating their next move.
Is now the time to buy Verisk, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
We’re happy investors have made money, but we're swiping left on Verisk for now. Here are two reasons why you should be careful with VRSK and a stock we'd rather own.
Why Is Verisk Not Exciting?
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.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Verisk’s sales grew at a sluggish 2% compounded annual growth rate over the last five years. This fell short of our benchmarks. 
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Verisk’s EPS grew at an unimpressive 9.6% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 4.7% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
Verisk isn’t a terrible business, but it doesn’t pass our quality test. With its shares outperforming the market lately, the stock trades at 40.5× forward price-to-earnings (or $291.53 per share). At this valuation, there’s a lot of good news priced in - we think there are better investment opportunities out there. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
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