Intrinsic value of Verisk Analytics, Inc. - VRSK

Previous Close

$164.58

  Intrinsic Value

$71.56

stock screener

  Rating & Target

str. sell

-57%

Previous close

$164.58

 
Intrinsic value

$71.56

 
Up/down potential

-57%

 
Rating

str. sell

We calculate the intrinsic value of VRSK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 26.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  2,577
  2,766
  2,963
  3,167
  3,379
  3,600
  3,830
  4,069
  4,318
  4,578
  4,848
  5,130
  5,424
  5,731
  6,052
  6,387
  6,737
  7,103
  7,486
  7,886
  8,306
  8,744
  9,204
  9,685
  10,190
  10,718
  11,272
  11,853
  12,462
  13,100
Variable operating expenses, $m
  1,581
  1,663
  1,749
  1,838
  1,930
  2,026
  2,126
  2,231
  2,339
  2,452
  2,111
  2,234
  2,362
  2,495
  2,635
  2,781
  2,933
  3,093
  3,259
  3,434
  3,616
  3,807
  4,007
  4,217
  4,437
  4,667
  4,908
  5,161
  5,426
  5,704
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,581
  1,663
  1,749
  1,838
  1,930
  2,026
  2,126
  2,231
  2,339
  2,452
  2,111
  2,234
  2,362
  2,495
  2,635
  2,781
  2,933
  3,093
  3,259
  3,434
  3,616
  3,807
  4,007
  4,217
  4,437
  4,667
  4,908
  5,161
  5,426
  5,704
Operating income, $m
  996
  1,103
  1,214
  1,329
  1,449
  1,574
  1,704
  1,839
  1,979
  2,126
  2,737
  2,896
  3,062
  3,236
  3,417
  3,606
  3,804
  4,010
  4,227
  4,453
  4,689
  4,937
  5,197
  5,469
  5,753
  6,052
  6,364
  6,692
  7,036
  7,396
EBITDA, $m
  1,630
  1,749
  1,874
  2,003
  2,137
  2,277
  2,422
  2,573
  2,731
  2,895
  3,066
  3,244
  3,430
  3,625
  3,827
  4,039
  4,261
  4,492
  4,734
  4,988
  5,253
  5,530
  5,821
  6,125
  6,444
  6,779
  7,129
  7,496
  7,881
  8,285
Interest expense (income), $m
  117
  147
  163
  179
  196
  214
  232
  251
  271
  292
  313
  335
  359
  383
  408
  435
  463
  492
  522
  553
  586
  621
  657
  695
  735
  776
  820
  865
  913
  963
  1,016
Earnings before tax, $m
  849
  940
  1,035
  1,133
  1,236
  1,342
  1,453
  1,568
  1,688
  1,813
  2,402
  2,538
  2,679
  2,827
  2,982
  3,143
  3,312
  3,489
  3,673
  3,866
  4,068
  4,280
  4,502
  4,734
  4,977
  5,232
  5,499
  5,779
  6,073
  6,380
Tax expense, $m
  229
  254
  279
  306
  334
  362
  392
  423
  456
  489
  648
  685
  723
  763
  805
  849
  894
  942
  992
  1,044
  1,098
  1,156
  1,215
  1,278
  1,344
  1,413
  1,485
  1,560
  1,640
  1,723
Net income, $m
  620
  686
  755
  827
  902
  980
  1,060
  1,144
  1,232
  1,323
  1,753
  1,852
  1,956
  2,064
  2,177
  2,295
  2,418
  2,547
  2,681
  2,822
  2,970
  3,124
  3,286
  3,456
  3,633
  3,819
  4,014
  4,219
  4,433
  4,658

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  6,347
  6,813
  7,297
  7,801
  8,324
  8,868
  9,434
  10,023
  10,636
  11,275
  11,941
  12,635
  13,360
  14,116
  14,906
  15,731
  16,593
  17,495
  18,438
  19,424
  20,457
  21,538
  22,670
  23,856
  25,098
  26,400
  27,764
  29,194
  30,694
  32,266
Adjusted assets (=assets-cash), $m
  6,347
  6,813
  7,297
  7,801
  8,324
  8,868
  9,434
  10,023
  10,636
  11,275
  11,941
  12,635
  13,360
  14,116
  14,906
  15,731
  16,593
  17,495
  18,438
  19,424
  20,457
  21,538
  22,670
  23,856
  25,098
  26,400
  27,764
  29,194
  30,694
  32,266
Revenue / Adjusted assets
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
Average production assets, $m
  3,059
  3,283
  3,517
  3,759
  4,011
  4,274
  4,546
  4,830
  5,126
  5,434
  5,754
  6,089
  6,438
  6,803
  7,183
  7,581
  7,997
  8,431
  8,886
  9,361
  9,859
  10,380
  10,925
  11,497
  12,095
  12,723
  13,380
  14,069
  14,792
  15,550
Working capital, $m
  -157
  -169
  -181
  -193
  -206
  -220
  -234
  -248
  -263
  -279
  -296
  -313
  -331
  -350
  -369
  -390
  -411
  -433
  -457
  -481
  -507
  -533
  -561
  -591
  -622
  -654
  -688
  -723
  -760
  -799
Total debt, $m
  3,013
  3,315
  3,630
  3,956
  4,296
  4,649
  5,016
  5,398
  5,796
  6,211
  6,643
  7,094
  7,564
  8,055
  8,567
  9,103
  9,663
  10,248
  10,860
  11,500
  12,170
  12,872
  13,607
  14,376
  15,182
  16,027
  16,913
  17,841
  18,814
  19,834
Total liabilities, $m
  4,119
  4,422
  4,736
  5,063
  5,402
  5,755
  6,122
  6,505
  6,903
  7,317
  7,750
  8,200
  8,670
  9,161
  9,674
  10,209
  10,769
  11,354
  11,966
  12,606
  13,277
  13,978
  14,713
  15,482
  16,289
  17,134
  18,019
  18,947
  19,920
  20,941
Total equity, $m
  2,228
  2,391
  2,561
  2,738
  2,922
  3,113
  3,311
  3,518
  3,733
  3,957
  4,191
  4,435
  4,689
  4,955
  5,232
  5,522
  5,824
  6,141
  6,472
  6,818
  7,180
  7,560
  7,957
  8,373
  8,809
  9,266
  9,745
  10,247
  10,774
  11,325
Total liabilities and equity, $m
  6,347
  6,813
  7,297
  7,801
  8,324
  8,868
  9,433
  10,023
  10,636
  11,274
  11,941
  12,635
  13,359
  14,116
  14,906
  15,731
  16,593
  17,495
  18,438
  19,424
  20,457
  21,538
  22,670
  23,855
  25,098
  26,400
  27,764
  29,194
  30,694
  32,266
Debt-to-equity ratio
  1.350
  1.390
  1.420
  1.440
  1.470
  1.490
  1.510
  1.530
  1.550
  1.570
  1.590
  1.600
  1.610
  1.630
  1.640
  1.650
  1.660
  1.670
  1.680
  1.690
  1.690
  1.700
  1.710
  1.720
  1.720
  1.730
  1.740
  1.740
  1.750
  1.750
Adjusted equity ratio
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  620
  686
  755
  827
  902
  980
  1,060
  1,144
  1,232
  1,323
  1,753
  1,852
  1,956
  2,064
  2,177
  2,295
  2,418
  2,547
  2,681
  2,822
  2,970
  3,124
  3,286
  3,456
  3,633
  3,819
  4,014
  4,219
  4,433
  4,658
Depreciation, amort., depletion, $m
  634
  647
  660
  674
  688
  703
  719
  735
  752
  769
  329
  348
  368
  389
  410
  433
  457
  482
  508
  535
  563
  593
  624
  657
  691
  727
  765
  804
  845
  889
Funds from operations, $m
  1,253
  1,333
  1,415
  1,501
  1,590
  1,683
  1,779
  1,879
  1,984
  2,093
  2,082
  2,200
  2,324
  2,453
  2,587
  2,728
  2,875
  3,028
  3,189
  3,357
  3,533
  3,718
  3,910
  4,113
  4,324
  4,546
  4,779
  5,023
  5,278
  5,546
Change in working capital, $m
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
Cash from operations, $m
  1,265
  1,344
  1,427
  1,513
  1,603
  1,696
  1,793
  1,894
  1,999
  2,108
  2,099
  2,218
  2,342
  2,471
  2,607
  2,748
  2,896
  3,051
  3,212
  3,382
  3,559
  3,744
  3,939
  4,142
  4,355
  4,578
  4,813
  5,058
  5,315
  5,585
Maintenance CAPEX, $m
  -162
  -175
  -188
  -201
  -215
  -229
  -244
  -260
  -276
  -293
  -310
  -329
  -348
  -368
  -389
  -410
  -433
  -457
  -482
  -508
  -535
  -563
  -593
  -624
  -657
  -691
  -727
  -765
  -804
  -845
New CAPEX, $m
  -216
  -225
  -233
  -242
  -252
  -262
  -273
  -284
  -296
  -308
  -321
  -335
  -349
  -364
  -381
  -398
  -416
  -435
  -454
  -475
  -498
  -521
  -546
  -571
  -599
  -627
  -658
  -689
  -723
  -758
Cash from investing activities, $m
  -378
  -400
  -421
  -443
  -467
  -491
  -517
  -544
  -572
  -601
  -631
  -664
  -697
  -732
  -770
  -808
  -849
  -892
  -936
  -983
  -1,033
  -1,084
  -1,139
  -1,195
  -1,256
  -1,318
  -1,385
  -1,454
  -1,527
  -1,603
Free cash flow, $m
  886
  945
  1,006
  1,070
  1,136
  1,205
  1,276
  1,350
  1,427
  1,508
  1,467
  1,554
  1,645
  1,739
  1,837
  1,940
  2,047
  2,159
  2,276
  2,398
  2,526
  2,660
  2,800
  2,946
  3,099
  3,260
  3,428
  3,604
  3,789
  3,982
Issuance/(repayment) of debt, $m
  290
  302
  314
  327
  339
  353
  367
  382
  398
  415
  432
  451
  470
  491
  513
  535
  560
  585
  612
  640
  670
  702
  735
  770
  806
  845
  885
  928
  973
  1,020
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  290
  302
  314
  327
  339
  353
  367
  382
  398
  415
  432
  451
  470
  491
  513
  535
  560
  585
  612
  640
  670
  702
  735
  770
  806
  845
  885
  928
  973
  1,020
Total cash flow (excl. dividends), $m
  1,176
  1,247
  1,321
  1,397
  1,476
  1,558
  1,643
  1,733
  1,825
  1,922
  1,899
  2,005
  2,115
  2,230
  2,350
  2,476
  2,607
  2,744
  2,888
  3,039
  3,196
  3,362
  3,535
  3,716
  3,906
  4,105
  4,314
  4,532
  4,762
  5,003
Retained Cash Flow (-), $m
  -157
  -164
  -170
  -177
  -184
  -191
  -199
  -207
  -215
  -224
  -234
  -244
  -254
  -265
  -277
  -290
  -303
  -316
  -331
  -346
  -362
  -379
  -397
  -416
  -436
  -457
  -479
  -502
  -526
  -552
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  1,019
  1,084
  1,151
  1,220
  1,292
  1,367
  1,445
  1,526
  1,610
  1,698
  1,666
  1,761
  1,861
  1,964
  2,073
  2,186
  2,304
  2,428
  2,557
  2,693
  2,834
  2,982
  3,137
  3,300
  3,470
  3,648
  3,835
  4,030
  4,236
  4,451
Discount rate, %
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
  955
  946
  929
  905
  873
  835
  791
  742
  689
  632
  533
  479
  425
  371
  320
  271
  226
  186
  149
  118
  91
  69
  51
  37
  26
  18
  12
  8
  5
  3
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Verisk Analytics, Inc. is a data analytics provider serving customers in insurance, natural resources and financial services. The Company operates through two segments: Risk Assessment and Decision Analytics. Its Risk Assessment segment serves its property and casualty insurance customers and focuses on prediction of loss, selection and pricing of risk, and compliance with their reporting requirements in each United States state in which they operate. In the Decision Analytics segment, the Company develops predictive models to forecast scenarios and produce both standard and customized analytics that help its customers manage their businesses, including predicting loss, selecting and pricing risk, detecting fraud before and after a loss event, and quantifying losses. It offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, natural resources intelligence, economic forecasting and various other fields.

FINANCIAL RATIOS  of  Verisk Analytics, Inc. (VRSK)

Valuation Ratios
P/E Ratio 46.5
Price to Sales 13.8
Price to Book 20.6
Price to Tangible Book
Price to Cash Flow 50.3
Price to Free Cash Flow 70.6
Growth Rates
Sales Growth Rate 13.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5.4%
Cap. Spend. - 3 Yr. Gr. Rate 1.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 171.2%
Total Debt to Equity 179.2%
Interest Coverage 7
Management Effectiveness
Return On Assets 13.1%
Ret/ On Assets - 3 Yr. Avg. 15.4%
Return On Total Capital 14.3%
Ret/ On T. Cap. - 3 Yr. Avg. 18%
Return On Equity 43.7%
Return On Equity - 3 Yr. Avg. 71.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 64.2%
Gross Margin - 3 Yr. Avg. 64.5%
EBITDA Margin 49.9%
EBITDA Margin - 3 Yr. Avg. 53.7%
Operating Margin 38.4%
Oper. Margin - 3 Yr. Avg. 40.9%
Pre-Tax Margin 32.8%
Pre-Tax Margin - 3 Yr. Avg. 37%
Net Profit Margin 29.6%
Net Profit Margin - 3 Yr. Avg. 28.8%
Effective Tax Rate 30.9%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 0%

VRSK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VRSK stock intrinsic value calculation we used $2395 million for the last fiscal year's total revenue generated by Verisk Analytics, Inc.. The default revenue input number comes from 0001 income statement of Verisk Analytics, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our VRSK stock valuation model: a) initial revenue growth rate of 7.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.7%, whose default value for VRSK is calculated based on our internal credit rating of Verisk Analytics, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Verisk Analytics, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of VRSK stock the variable cost ratio is equal to 62.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for VRSK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Verisk Analytics, Inc..

Corporate tax rate of 27% is the nominal tax rate for Verisk Analytics, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the VRSK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for VRSK are equal to 118.7%.

Life of production assets of 17.5 years is the average useful life of capital assets used in Verisk Analytics, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for VRSK is equal to -6.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2070.6 million for Verisk Analytics, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 163.513 million for Verisk Analytics, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Verisk Analytics, Inc. at the current share price and the inputted number of shares is $26.9 billion.

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