Hook / Thesis
Verisk (VRSK) is being priced more like a growth company that lost its growth than as a durable, high-margin analytics franchise that simply faces cyclical variability in customer spending. That’s an important distinction: this business sells mission-critical underwriting, claims and risk models to insurers — stickier and less discretionary than many investors seem to assume after the stock fell from its highs.
We think the market's short-term growth worries have created a tactical opportunity. Fundamentals show a company with strong margins (operating income 354.3M in the most recent quarter), steady net income (253.3M in the same quarter), and reliable operating cash flow (244.5M in Q2 2025). Those characteristics support a buy with a defined stop and realistic upside targets.
What Verisk does and why the market should care
Verisk is a data, analytics and technology provider focused on P&C (property-casualty) insurance use cases: underwriting (forms, rules, loss costs, catastrophe modeling), claims (estimate tools, antifraud), and exposure management. About 83% of revenue is U.S.-based, which gives the company both scale and regulatory proximity to its core customers.
The business model matters: much of Verisk's revenue comes from recurring, mission-critical products that are embedded in insurer workflows. That creates high retention and predictable renewals even when insurers tighten budgets. Put differently, Verisk is closer to an SaaS-like annuity for insurers than a discretionary services vendor.
What the numbers show
Use the recent quarterly run to judge continuity and margin structure:
- Q2 (ended 06/30/2025) revenue: $772.6M (filing 07/30/2025).
- Q1 (ended 03/31/2025) revenue: $753.0M; sequential increase suggests ongoing demand for core offerings.
- Q2 (06/30/2025) operating income: $354.3M implying an operating margin around 45.8% for the quarter (354.3M / 772.6M).
- Q2 net income: $253.3M and diluted EPS of roughly $1.81 (diluted shares 140.34M).
- Operating cash flow remains healthy: Q2 2025 net cash flow from operating activities was $244.5M.
- Shareholder yield: most recent declared quarterly dividend is $0.45 (annualized ~$1.80), implying an approximate dividend yield of ~0.95% at the current price near $190.
On the balance sheet, total assets in Q2 2025 are reported at $4.79B and liabilities at $4.48B. The company has used capital markets to finance activity: the company priced a senior notes offering on 08/07/2025, consistent with access to debt markets and active capital management.
Valuation framing
Snapshot math to ground the argument:
- Last trade price in the snapshot is about $190.31 (intraday levels vary).
- Diluted shares outstanding in the most recent quarter: 140.34M. Multiplying gives an implied market cap of roughly $26.7B (190.31 * 140.34M).
- Annualizing the most recent quarter's revenue (Q2 2025 = 772.6M) gives a rough run-rate revenue of ~$3.09B. That implies a P/S of ~8.6x on run-rate revenue.
That P/S ratio looks rich in absolute terms but must be read against the business mix: high operating margins (~46% this quarter), strong cash conversion and recurring assignments to insurers. If Verisk can sustain mid-single-digit organic revenue growth with ~40%+ operating margins, a multiple in this neighborhood is defensible for a high-quality data franchise. The current price largely reflects a scenario where growth meaningfully slows and margins compress; we think that's too pessimistic.
Trade idea (actionable)
We recommend a tactical long with clearly defined risk management.
- Trade direction: Long VRSK
- Entry zone: $185 - $195 (current liquidity and intraday VWAP behavior suggests this is a reasonable band; last close ~ $190.39).
- Initial stop-loss: $170 (about -10% from the midpoint of the entry band). If price breaches $170 with volume, the technical setup has broken and the trade is invalidated for us.
- Targets:
- Target 1: $220 - near recent consolidation and a logical first resistance zone.
- Target 2: $260 - objective to recapture a meaningful portion of the multi-month sell-off and re-rate toward historical mid-cycle levels.
- Sizing: Limit size so that a stop at $170 represents no more than 1-2% portfolio risk for a typical retail allocation; adjust accordingly for risk tolerance.
- Time horizon: Position to 6-12 months — enough time for sentiment to normalize and for catalysts to play out.
Catalysts to monitor (2–5)
- Quarterly results that show continued recurring revenue strength or expanding cross-sell in claims/healthcare/cyber products (watch next filings after 07/30/2025 cadence).
- Management commentary showing renewed customer spending cycles in catastrophe modeling or large enterprise renewals (insurers often re-contract on multi-year cycles).
- Evidence that the company is converting operating cash flow into buybacks at a pace that supports EPS (or returning capital through dividends) — watch the cash flow statements and financing activities post-notes issuance (08/07/2025).
- Any strategic partnerships or product wins (e.g., expanded cyber resilience offerings) that broaden addressable market and reduce single-market concentration risk.
Risks and counterarguments
We name the main risks explicitly — this is not a no-risk trade.
- Growth deceleration risk: If insurers materially cut tech spend and renewals are pushed out, revenue could slide. The market is already pricing a weak-growth scenario.
- Competition / technology disruption: Broader adoption of new AI tooling or competitive pricing by larger cloud players could compress Verisk’s pricing power over time.
- Leverage / financing risk: The senior notes issuance (08/07/2025) increases fixed obligations; a weakening top line plus higher rates could pressure net income or ratings, forcing cost cuts.
- Macro or catastrophe timing: Large, unexpected catastrophe losses or macro shocks can reorder insurer priorities and cash flows, which sometimes delays analytics projects or renewals.
- Sentiment / multiple compression: If the market re-rates data franchises to materially lower multiples, the stock may stay rangebound or fall further even with stable operations.
Counterargument: The market may be right. If Verisk's organic growth slides below low single-digits and management signals structural margin pressure (e.g., higher investment in R&D without near-term payback), the valuation would need to reset lower. Missing those signs could make this trade premature.
What would change our mind
- Positive signs: We would add to the position if Verisk reports sequential acceleration in contract renewals, consistent strength in operating cash flow beyond seasonal patterns, or higher-than-expected cross-sell in new product areas (cyber, healthcare payer analytics).
- Negative signs: We would reduce or close the position if the company reports declining renewal rates, material margin erosion (operating margins well below 40% on a sustained basis), or if leverage metrics deteriorate after the notes issuance such that interest burden meaningfully reduces free cash flow.
Conclusion
Verisk is a defensive, profitable analytics business with subscription-like characteristics, healthy operating margins (354.3M operating income on 772.6M revenue in Q2 2025), and repeatable cash generation. The recent price action appears driven more by sentiment about future growth than by changes to the core economics of the business. For disciplined investors comfortable with the insurance-tech exposure, the 185-195 entry band with a $170 stop offers an asymmetrical risk/ reward: limited drawdown if the thesis fails but meaningful upside if the stock re-rates closer to its pre-selloff multiple.
We rate this a tactical long (position trade) with a 6-12 month horizon and a medium risk tolerance. Monitor upcoming quarterly commentary, cash flow trends, and any signals that insurer discretionary spend is worsening — those would be the clearest invalidators of the thesis.
Disclosure: This is not financial advice. The trade idea is based on publicly filed financials and market data; adjust sizing and stops to your risk tolerance.