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Dow 20,000 is Great News for Factset Research

Stock (Symbol)

Factset Research (FDS)

Stock Price

$170

Sector
Financial
Data is as of
January 14, 2017
Expected to Report
Mar 13 – 17
Company Description
factset_logoFDS is a provider of integrated financial information and analytical applications to the global investment community. FDS operates through three segments based on geographic business activities: the U.S., Europe and Asia Pacific. Sales, consulting, data collection, product development and software engineering are the primary functional groups within the U.S., Europe and Asia Pacific segments that provide global financial and economic information to investment managers, investment banks and other financial services professionals. The U.S. segment services finance professionals, including financial institutions throughout the Americas, while the European and Asia Pacific segments service investment professionals located throughout Europe and the Asia Pacific region, respectively. FDS combines content regarding companies and securities from markets all over the globe into a single online platform of information and analytics. Source: Thomson Financial
Sharek’s Take
David SharekDow 20,000 is great news for Factset Research (FDS)! Factset provides financial data and analytics to hedge funds, investment managers, investment bankers, wealth managers and private equity firms. A strong equity market means more assets for money managers to bill, and more money they can spend on research. Factset’s data includes company data, market data, news and research. The company provides its software on a subscription basis, which gives it a steady stream of revenues each quarter. Mutual funds and hedge funds depend on Factset when doing their research and due diligence, thus the company can pass along small fee increases (say 8-9%) each year. Last qtr FDS had 6% sales growth, increased its Annual Subscription Value by 8%, and with the help of stock buybacks and a lower tax rate delivered 22% profit growth. The tax rate dropped from 31% to 26% last qtr primarily due to the company’s operational realignment in September. FDS gets around $750 million in revenue from the U.S. and $100 million Internationally. Factset was founded in 1978 and has grown profits every year since it went public in 1996.The company pays a dividend of 1%, buys back stock, makes acquisitions, and usually grows profits in the double-digits. Factset Research is a great franchises most investors are unaware of. This is a solid buy-and-hold stock for investors who are looking for double-digit growth with a good degree of security. With the stock market climbing, this company is looking good for 2017.
One Year Chart
FDS stock fell 2QtrsAgo after it reported profits as it lowered forward-looking estimates just a bit. This qtr estimates rose sharply due in part from the lower tax rate. 2017 est. increased from $7.04 to $7.27, 2018 from $7.75 to $7.98, and 2019 from $8.43 to $8.71. Qtrly profit Estimates also increased a good bit and now analysts expect 13%, 12%, 12% and 10% profit growth the next 4 qtrs. This stock has an Est. LTG of just 10% per year, so twelve or thirteen percent growth would be great. Theoretically, a P/E of 23 would be high for a 10% grower, but Factset is a special company.
Fair Value
My Fair Value on this stock is 26 times earnings, which is $189 a share. At $170 the stock has good appeal for investors looking to invest for the long-term. But this stock might not sit well with growth investors who are searching for higher growth.
Bottom Line
With the Dow hitting 20,000 today, investors and money managers are rejoicing! Factset is too, as a good stock market means more clients and the ability for current clients to pay more for subscriptions. Factset has above average safety, pays a 1% yield, buys back stock, and has an Est LTG of 10% per year. That’s my recipe for success! The company has delivered profit growth every year since it went public more than 20 years ago, and has grown profits 13% a year the past decade. 2017 should be a good one, as profit growth is getting a boost from a lower tax rate. FDS ranks 9th of 30 stocks in the Conservative Growth Portfolio Power Rankings.
Power Rankings
Growth Stock Portfolio

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Aggressive Growth Portfolio

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Conservative Stock Portfolio

9 of 30

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