FactSet Research Systems Inc. (NYSE:FDS) is a leading provider of data services to the financial industry. Over the past decade, the company’s business has really taken off, and shares have gained accordingly. With the growing need for data in the industry, is there still time to get in on this growing company, or has the opportunity passed us by?
About FactSet Research Systems
FactSet Research Systems Inc. (NYSE:FDS) provides economic and financial data to investment professionals, combining its own content with content from hundreds of other sources into a single online data source. The company designs personalized workspaces for investment managers, hedge funds, investment bankers, quantitative researchers, and more. Their features include market analytics, financial data, financial screening, and many others.
Over the past several years, acquisitions have been one of the main drivers of growth in the company. To name a few, in 2008 FactSet Research Systems Inc. (NYSE:FDS) purchased a copy of the Thomson Fundamentals database for $62 million, which included historical financial data on tens of thousands of companies. Last July, Fact Set acquired StreetAccount, which greatly expanded its real-time news and analytical capabilities. The company also strives to develop and perfect its own proprietary content in order to offer more differentiated content and services than any of its competitors.
Given its growth in revenues and earnings over the years, FactSet Research Systems Inc. (NYSE:FDS) actually seems inexpensive at the current price level. At about 23 times last year’s earnings, the company’s valuation is pretty close to its historical average. FactSet is expected to earn $4.58 per share for the current fiscal year, and this is projected to increase to $5.05 and $5.73 in 2014 and 2015, respectively. This translates to a three-year average annual earnings growth rate of just under 12%, which is about what I would expect with such a P/E ratio.
Also worthy of consideration is FactSet Research Systems Inc. (NYSE:FDS)’s modest, but significant, dividend yield of 1.4% annually, which has been raised consistently over the years. Also, one of my favorite things to see in prospective investments is more cash than debt, and FactSet definitely meets this standard, with over $200 million in cash and no debt whatsoever.
Other Ways to Play
Although not an apples-to-apples comparison, Intuit Inc. (NASDAQ:INTU) is a pretty close peer in terms of publicly traded financial data software companies. Intuit Inc. (NASDAQ:INTU) is best known for its flagship accounting and tax preparation software programs QuickBooks, TurboTax, and Quicken. Intuit has experienced similar revenue growth to FactSet Research Systems Inc. (NYSE:FDS) as more people are transitioning to online methods of managing finances, and are expected to grow at a similar 12% rate going forward. Shares trade at a P/E of 20 times TTM earnings, and Intuit Inc. (NASDAQ:INTU) has a similarly impressive balance sheet. The company does have some debt, but it is overshadowed by a nice stockpile of cash.