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FactSet (FDS) on Growth Path: Should You Hold the Stock?
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A successful portfolio manager understands the importance of adding well-performing stocks at the right time.
One such stock that investors need to hold on to now is FactSet Research Systems Inc. (FDS - Free Report) . Though there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
FactSet reported its quarterly numbers (second-quarter fiscal 2017) on Feb 28. To some investors, choosing the stock may appear to be a no-brainer because right after an earnings release, a company is almost always on investors’ radar. So, the period following earnings releases is often marked by high market activity. Moreover, indicators of a stock’s bullish run include a rise in its share price, strong fundamentals and a continued uptrend in estimates.
FactSet registered a return of approximately 3.1% in the last six months, outperforming the Zacks categorized Business Information Services industry’s loss of 2%.
Let’s look at the reasons behind FactSet’ solid momentum.
Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for FactSet’s fiscal 2017 witnessed upward revisions. The Zacks Consensus Estimate for fiscal 2017 is now pegged at $7.29 per share compared with $7.27 per share projected by the company.
Digging Into the Earnings Details
The company reported adjusted earnings per share of $1.81, which surpassed the Zacks Consensus Estimate by a penny and was toward the higher end of the guided range of $1.78–$1.82. Moreover, adjusted earnings improved 13.8% on a year-over-year basis.
FactSet’s revenues of $294.4 million increased 4.5% from the year-ago quarter but missed the Zacks Consensus Estimate of $296 million. Organic revenues increased 7% year over year to $291.5 million during the quarter. The company witnessed better-than-expected growth across products and geographic regions, which aided quarterly revenues.
FactSet’s Annual Subscription Value (ASV) increased 6.5% year over year to $1.19 billion as of Feb 28, 2017. Of this, nearly 83.2% was generated by buy-side clients, while the rest came from sell-side firms performing functions like mergers & acquisition, advisory work and equity research.
FactSet added 143 clients in the reported quarter, taking the tally to 4,404. The company retained 93% of its clients. The retention percentage was more than 95% of ASV.
Other Driving Factors
The company has a high client-retention ratio, which is a positive. Also, ASV increased year over year and the company added a good number of clients.
The share repurchase program is expected to support earnings in the long run apart from boosting shareholder value.
Recently, FactSet announced the acquisition of BISAM Technologies S.A. FactSet believes that BISAM’s B-One solution will enhance its analytics suite and client-reporting capabilities. Its product, Cognity, is expected to boost FactSet’s risk analysis for derivatives and quantitative portfolio construction. Hence, we believe that the synergies from the acquisition will provide tailwind to the company’s financials.
Over the years, FactSet has made several acquisitions to expedite growth. The company’s most notable acquisitions include the buyout of Portware LLC, Code Red, Revere Data LLC, StreetAccount, etc. These acquisitions are aimed at aiding FactSet to deliver innovative products and evolve as a global financial database company. The buyouts will also help the company to maximize value for its partners and provide customers with exclusive content sets.
Going ahead, according to ReportsnReports, the Global Business Information market is anticipated to grow at a CAGR of 5.15% from 2014 to 2019. FactSet, being one of the key data providers, is expected to gain a competitive edge through its technological know-how and increasing share in new markets.
Risks Remain
Nonetheless, substitute products at competitive prices, from the likes of Bloomberg L.P., Dow Jones & Company Inc., MSCI Inc. (MSCI - Free Report) and Thomson Reuters (TRI - Free Report) are giving tough competition to FactSet.
Bottom Line
FactSet also delivered positive earnings surprises in three of the last four quarters with an average beat of 0.9%. Given that the company’s long-term earnings per share growth rate is 10.7% and has a Growth Style Score of “B”, we believe that the stock still has much upside potential. We can essentially filter the negatives and focus on the positives which drive price.
Moreover, from a valuation perspective, the stock looks attractive, as it currently trades significantly lower than the industry average based on a forward earnings estimate. This signifies huge upward potential. FactSet currently trades at a forward P/E of 22.57x compared with the industry group average of 23.10x.
Hence, we believe that there is still much momentum left in this Zacks Rank #3 (Hold) stock. Keeping these positives in mind, we believe that FactSet is one such technology stock that deserves a place in investors’ portfolio.
Applied Materials has a long-term expected earnings growth rate of 15.5%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
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FactSet (FDS) on Growth Path: Should You Hold the Stock?
A successful portfolio manager understands the importance of adding well-performing stocks at the right time.
One such stock that investors need to hold on to now is FactSet Research Systems Inc. (FDS - Free Report) . Though there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
FactSet reported its quarterly numbers (second-quarter fiscal 2017) on Feb 28. To some investors, choosing the stock may appear to be a no-brainer because right after an earnings release, a company is almost always on investors’ radar. So, the period following earnings releases is often marked by high market activity. Moreover, indicators of a stock’s bullish run include a rise in its share price, strong fundamentals and a continued uptrend in estimates.
FactSet registered a return of approximately 3.1% in the last six months, outperforming the Zacks categorized Business Information Services industry’s loss of 2%.
Let’s look at the reasons behind FactSet’ solid momentum.
Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for FactSet’s fiscal 2017 witnessed upward revisions. The Zacks Consensus Estimate for fiscal 2017 is now pegged at $7.29 per share compared with $7.27 per share projected by the company.
Digging Into the Earnings Details
The company reported adjusted earnings per share of $1.81, which surpassed the Zacks Consensus Estimate by a penny and was toward the higher end of the guided range of $1.78–$1.82. Moreover, adjusted earnings improved 13.8% on a year-over-year basis.
FactSet’s revenues of $294.4 million increased 4.5% from the year-ago quarter but missed the Zacks Consensus Estimate of $296 million. Organic revenues increased 7% year over year to $291.5 million during the quarter. The company witnessed better-than-expected growth across products and geographic regions, which aided quarterly revenues.
FactSet’s Annual Subscription Value (ASV) increased 6.5% year over year to $1.19 billion as of Feb 28, 2017. Of this, nearly 83.2% was generated by buy-side clients, while the rest came from sell-side firms performing functions like mergers & acquisition, advisory work and equity research.
FactSet added 143 clients in the reported quarter, taking the tally to 4,404. The company retained 93% of its clients. The retention percentage was more than 95% of ASV.
Other Driving Factors
The company has a high client-retention ratio, which is a positive. Also, ASV increased year over year and the company added a good number of clients.
The share repurchase program is expected to support earnings in the long run apart from boosting shareholder value.
Recently, FactSet announced the acquisition of BISAM Technologies S.A. FactSet believes that BISAM’s B-One solution will enhance its analytics suite and client-reporting capabilities. Its product, Cognity, is expected to boost FactSet’s risk analysis for derivatives and quantitative portfolio construction. Hence, we believe that the synergies from the acquisition will provide tailwind to the company’s financials.
Over the years, FactSet has made several acquisitions to expedite growth. The company’s most notable acquisitions include the buyout of Portware LLC, Code Red, Revere Data LLC, StreetAccount, etc. These acquisitions are aimed at aiding FactSet to deliver innovative products and evolve as a global financial database company. The buyouts will also help the company to maximize value for its partners and provide customers with exclusive content sets.
Going ahead, according to ReportsnReports, the Global Business Information market is anticipated to grow at a CAGR of 5.15% from 2014 to 2019. FactSet, being one of the key data providers, is expected to gain a competitive edge through its technological know-how and increasing share in new markets.
Risks Remain
Nonetheless, substitute products at competitive prices, from the likes of Bloomberg L.P., Dow Jones & Company Inc., MSCI Inc. (MSCI - Free Report) and Thomson Reuters (TRI - Free Report) are giving tough competition to FactSet.
Bottom Line
FactSet also delivered positive earnings surprises in three of the last four quarters with an average beat of 0.9%. Given that the company’s long-term earnings per share growth rate is 10.7% and has a Growth Style Score of “B”, we believe that the stock still has much upside potential. We can essentially filter the negatives and focus on the positives which drive price.
Moreover, from a valuation perspective, the stock looks attractive, as it currently trades significantly lower than the industry average based on a forward earnings estimate. This signifies huge upward potential. FactSet currently trades at a forward P/E of 22.57x compared with the industry group average of 23.10x.
Hence, we believe that there is still much momentum left in this Zacks Rank #3 (Hold) stock. Keeping these positives in mind, we believe that FactSet is one such technology stock that deserves a place in investors’ portfolio.
Another Stock to Consider
A better-ranked stock worth considering in the broader technology sector is Applied Materials, Inc. (AMAT - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Materials has a long-term expected earnings growth rate of 15.5%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>