One Reason Verisk Analytics (VRSK) Stock Is Slipping Today

NEW YORK (TheStreet) -- Shares of Verisk Analytics Inc. (VRSK) are down 1.66% to $62.93 after the company was downgraded to "hold" from "buy" at Deutsche Bank earlier on Tuesday.

The firm trimmed the price target to $67 from $68 for the data and information holding company, and reduced the annual EPS estimate for fiscal 2015 to $2.64 from $2.68.

Deutsche Bank said it lowered Verisk Analytics' rating because market growth is expected to slow, putting emphasis on market share gains, and premium growth has decelerated to flat.

"Total US Medicare Advantage (MA) enrollment growth is expected to slow into '15, making share gains more important to VRSK's largest Healthcare segment; insurance industry premium growth has decelerated to flat [year over year], which could drive slightly slower insurance rev growth in 2015; and we think any share price outperformance will come only from earnings beats and not multiple expansion," said Deutsche Bank analyst Paul Ginocchio.

Separately, TheStreet Ratings team rates VERISK ANALYTICS INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate VERISK ANALYTICS INC (VRSK) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, increase in stock price during the past year and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • VRSK's revenue growth has slightly outpaced the industry average of 4.7%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • VERISK ANALYTICS INC has improved earnings per share by 7.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, VERISK ANALYTICS INC increased its bottom line by earning $1.97 versus $1.92 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $1.97).
  • The gross profit margin for VERISK ANALYTICS INC is rather high; currently it is at 59.69%. Regardless of VRSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VRSK's net profit margin of 22.06% significantly outperformed against the industry.
  • In its most recent trading session, VRSK has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Professional Services industry and the overall market, VERISK ANALYTICS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: VRSK Ratings Report
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