Verisk Analytics, a prominent provider of data analytics and software for the insurance industry, has seen its stock decline approximately 21% this year and 34% over the past 12 months. This downturn has raised investor concerns about the company's growth potential, particularly in light of AI advancements that could allow insurers to develop their own tools.
However, Sethi emphasizes that Verisk's proprietary data and software are difficult to replicate, with over 90% of its revenue stemming from unique data and intellectual property. The company has a robust business model, with more than 80% of its revenue being recurring and EBITDA margins exceeding 50%.
Although growth has slowed to around 5% to 6% recently, Sethi believes this is a temporary setback, influenced by lower severe weather events and minor issues with government contracts and auto claims. He notes that Verisk's valuation has become more attractive, trading at roughly 15 times forward enterprise value to EBITDA, down from historical levels of 20 to 25 times.
Sethi remains optimistic about the company's future growth and sees it as a strong investment opportunity at a discount