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Here's Why You Should Hold FactSet (FDS) in Your Portfolio

FactSet Research Systems Inc. FDS has an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of its growth.

The company has an expected long-term earnings per share (three to five years) growth rate of 8.5%. Further, earnings are anticipated to register 1.4% growth in fiscal 2021 and 6% in fiscal 2022.

Shares of FactSet have gained 19.3% in the year-to-date period compared with the industry’s 3.9% rise.

Factors That Bode Well

FactSet has made several acquisitions to expedite growth. The most notable buyouts include BISAM, IDMS, Portware LLC, Code Red, Revere Data LLC, StreetAccount, etc. The acquisitions of BISAM and IDMS have increased the company’s international footprint, particularly in Europe. Recently, FactSet announced that it has entered into an agreement to acquire Truvalue Labs.

FactSet’s consistent efforts of rewarding its shareholders in the form of share repurchase and dividend payments are impressive. In fiscal 2019, the company repurchased shares worth $220.4 million and paid out dividends of $100.1 million. During fiscal 2018, the company repurchased shares worth $303.9 million and paid out dividends of $89.4 million. Recently, FactSet announced that its board of directors approved a quarterly cash dividend of 77 cents per share. The cash dividend will be paid out to shareholders on Dec 17 as of record date Nov 30.

Risks Associated

FactSet continues to face stiff competition from other players in the market providing financial market data, analytics and related services. Pricing pressure continues to act as a major headwind for FactSet, resulting in reduction in revenues and loss of market share.

FactSet’s international presence makes it vulnerable to foreign currency exchange rate fluctuations. The company generated 37.7% of revenues from operations outside the United States in fiscal 2019, 37.6% in fiscal 2018 and 35.8% in fiscal 2017. The increase in the proportion of revenues coming from international operations reflect the company’s growing dependence in them.

Zacks Rank and Stocks to Consider

FactSet currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader Zacks Business Services sector are CRA International, Inc. CRAI, Gartner, Inc. IT and Insperity, Inc. NSP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term earnings (three to five years) growth rate for CRA International, Gartner and Insperity is estimated at 13%, 13.5% and 15%, respectively.

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