Financial data and analytics company FactSet Research Systems Inc. (FDS) in Norwalk, Conn., provides insight and information through research, analytics, and trading workflow solutions, content, and technology solutions, and wealth management. The company was added to the S&P 500 index on Dec. 20, 2021.
The stock has soared 44.2% in price year-to-date, outperforming the benchmark S&P 500 index's 25.8% returns. In addition, the stock hit its all-time high of $485.48 on December 23.
FDS' impressive quarterly results and continuing investments to boost its top-line growth have contributed to the stock's price rally. Furthermore, because FDS intends to capitalize on its leading open content and analytics platform because the demand for distinctive content remains high, it could gain significant momentum in the coming months.
Here is what could shape FDS' performance in the near term:
Strategic Acquisition
In October, FDS acquired Cobalt Software, Inc., a leading provider of portfolio monitoring solutions to the private capital market. This acquisition contributes to FDS' goal of scaling its data and workflow solutions through targeted investments as part of a multi-year investment plan and expands its private markets offering.
Positive Developments
This month, FDS announced the addition of fixed-income trading capabilities to its market-leading execution management solution (EMS). FactSet trading solution Portware is recognized for its electronic trading and automation services in the listed asset and foreign exchange markets. With the addition of fixed-income trading, it can now assist clients in trading more effectively across a broader range of asset classes.
Last month, FDS added a complete financial data and analytics solution to the Amazon Web Services (AWS) Data Exchange. More than 30 proprietary datasets accessible inside the FactSet ecosystem will be deployed on AWS Data Exchange, allowing clients to leverage the company's leading content for faster, more efficient decision-making. This feature will assist clients in connecting proprietary and third-party information currently held on Amazon Redshift, while also simplifying the extract, transform, and load (ETL) process to shorten time-to-market and enhance data quality.
Strong Financials and Profitability
During the first quarter, ended November 30, 2021, FDS' revenue increased 9.4% year-over-year to $424.73 million. Its operating income grew marginally from its year-ago value to $122.66 million. Its net income surged 6.4% from the prior-year quarter to $107.65 million, while its EPS increased 6.5% year-over-year to $6.5. In addition, its annual subscription value (ASV) plus professional services rose 6.3% year-over-year to $1.7 billion.
FDS' 29.2% trailing-12-months EBITDA margin is 42% higher than the 23.5% industry average. Also, its ROC, asset turnover ratio, and ROA are 150.7%, 258.3%, and 1221.6% higher than the respective industry averages. Furthermore, its $538.87 million in cash from operations is 292.3% higher than the $137.37 million industry average.
Impressive Growth Prospects
Street expects FDS' revenues and EPS to rise 23.3% and 18.8% year-over-year to $1.96 billion and $12.31, respectively, in the current year. Moreover, the company's EPS is expected to increase 9.2% in the current quarter and 12.1% next quarter. In addition, FDS' EPS is expected to rise at a 7.1% CAGR over the next five years.
POWR Ratings Reflect Solid Prospects
FDS has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. FDS has an A grade for Quality. The company's solid earnings and profitability are consistent with the Quality grade.
The stock is graded B for Stability, which is justified given the stock's 0.75 beta.
Of the 124 stocks in the D-rated Financial Services (Enterprise) industry, FDS is ranked #14.
Beyond what is stated above, we have graded FDS for Growth, Value, Sentiment, and Momentum. Get all FDS ratings here.
Bottom Line
FDS' strong top-line performance and rapid technological advancements have boosted its earnings and revenue growth over the past few quarters. In addition, the company successfully beat analysts' earnings estimates in its last reported quarter. So, given its solid fundamentals and impressive growth outlook, we think the stock could be a great pick now.
How Does FactSet Research Systems Inc. (FDS) Stack Up Against its Peers?
FDS has an overall grade of B in our proprietary rating system. This rating is superior to its peers Nelnet Inc. (NNI), Evertec Inc. (EVTC), and Donnelley Morningstar Inc. (MORN), which have C (Neutral) rating.
FDS shares were unchanged in premarket trading Monday. Year-to-date, FDS has gained 45.52%, versus a 27.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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