With Returning Headcount Growth, Verisk May Be Worth 50% More

Summary

• Verisk offers financial services and data analytics to business customers in the insurance, energy, and specialized markets.
• The company appears to be returning to normal levels of headcount growth. I expect an acceleration in the number of new solutions delivered by the company’s data management team.
• Verisk expects to significantly reduce its financial obligations in the near future. Besides, most rating agencies offer ratings about the company, which I believe are acceptable.
• My CAPM model includes a beta around 1.05, cost of equity close to 7.5%, and cost of debt after tax close to 5%. The result is a WACC close to 6.5%-8%. In my estimations about the future, I assumed that the WACC would change a bit when the company’s financial figures and the market conditions change.
• With a discount of 7.5x, the sum of free cash flow from 2021 to 2030 stands close to $8.82 billion. The terminal free cash flow is equal to approximately $2.17 billion, and the implied stock price is equal to $384.

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If Verisk (NASDAQ:VRSK) can hire and train new employees in order to develop new solutions and datasets, there is a significant upside potential in the company’s valuation. My DCF model provided a fair price of $384. By taking

Analyst’s Disclosure:I/we have a beneficial long position in the shares of VRSK either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.