FactSet Research Systems Inc. (FDS): Don’t Buy This Stock Because It Lacks Growth

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FactSet Research Systems Inc. (NYSE:FDS) trades at 19.4 forward price-to-earnings ratio. It also operates at a healthy 33.4% margin. Thomson Reuters trades at 15.75 forward price-to-earnings ratio and operates at a 20% margin, while Morningstar trades at 24 forward price-to-earnings ratio and operates at a 24% margin. The group looks fairly priced, though Moringstar’s shares may have gotten ahead of themselves.

Industry comparisons

Thomson Reuters is interesting from an income perspective. The company’s stock yields an impressive 4.10%. On the other hand, the company has a relatively high debt-to-equity ratio of 0.45. With the company’s stable cash flow from various business segments, however, it seems to handle it well.

Morningstar’s 0.67% dividend is not something you would look for. With the current state of the economy, retail investors are not fully back in the market. Recent market action adds to overall anxiety, something that is not favorable for Morningstar’s growth prospects. The company is a well-run business, but I see limited upside for the stock while the risks are significant.

Bottom line

FactSet Research Systems Inc. (NYSE:FDS) has a solid business, but you need more than just solid business for a good stock growth. At the present, I do not see any growth points that could substantially move the stock. It is reasonably valued when compared to peers. The demand for financial information is stable, but not soaring. I think that FactSet will continue to trade in the same range where it is currently trading for more than a year.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends FactSet Research Systems and Morningstar. Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Don’t Buy This Stock Because It Lacks Growth originally appeared on Fool.com and is written by Vladimir Zernov.

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