With a daily loss of -2.14% and a notable 3-month gain of 5.6%, FactSet Research Systems Inc (FDS, Financial) presents an interesting case for valuation analysis. Its Earnings Per Share (EPS) (EPS) stands at 12.04, prompting investors to question whether the stock is fairly valued. This article delves into the intricacies of FactSet Research Systems' valuation, urging readers to consider the following in-depth analysis.
Company Overview
FactSet Research Systems Inc (FDS, Financial) is a key player in providing financial data and portfolio analytics to the global investment community. The company has built a robust platform by aggregating data from a variety of sources, including third-party suppliers, news outlets, and exchanges. FactSet's services extend beyond data provision to include vital portfolio analytics, which are instrumental for companies in monitoring portfolios and fulfilling reporting obligations. With 82% of its annual subscription value coming from buy-side clients, FactSet Research Systems has cemented its position in the industry. The company's history of strategic acquisitions, such as Portware in 2015 and BISAM in 2017, along with the recent purchase of CUSIP Global Services in 2022, underscores its commitment to expanding its capabilities and offerings.
When juxtaposed with the GF Value, which estimates a fair value of $472.4, FactSet Research Systems' stock price of $448.65 suggests a company that is fairly valued. This initial comparison sets the stage for a deeper examination of the company's intrinsic value.
Understanding GF Value
The GF Value is a proprietary metric that represents the intrinsic value of a stock. It is meticulously calculated by considering historical trading multiples such as PE, PS, PB Ratios, and Price-to-Free-Cash-Flow. Additionally, a GuruFocus adjustment factor is applied, which takes into account the company's historical returns and growth. Future business performance estimates also play a crucial role in this valuation.
FactSet Research Systems (FDS, Financial) appears to be fairly valued according to the GuruFocus Value calculation. The GF Value is an estimate of the stock's fair trade value, taking into account historical trading multiples, past business growth, and future business performance projections. If a stock's price is significantly above the GF Value Line, it may be overvalued, indicating a potentially lower future return. Conversely, if it is below the GF Value Line, the future return could be higher. With a market cap of $17 billion, FactSet Research Systems' current price suggests the stock is trading at a fair value.
As FactSet Research Systems is fairly valued, the long-term return of its stock is likely to mirror the rate of its business growth, making it a potentially stable investment.
Link: These companies may deliver higher future returns at reduced risk.Financial Strength Assessment
When considering an investment, the financial strength of a company is a vital factor. It helps in gauging the risk of permanent capital loss. Key indicators such as the cash-to-debt ratio and interest coverage provide insight into a company's financial robustness. FactSet Research Systems has a cash-to-debt ratio of 0.25, which, though lower than many of its peers in the Capital Markets industry, still reflects a fair financial strength, with a GuruFocus ranking of 6 out of 10.
Profitability and Growth Prospects
Investing in profitable companies, especially those with a track record of consistent profitability, is generally less risky. FactSet Research Systems has maintained profitability for the past decade. With an annual revenue of $2.10 billion and an EPS of $12.04, coupled with an operating margin of 31.42%, the company is not only profitable but also outperforms 70.05% of its industry peers. Its profitability rank is an impressive 10 out of 10.
Growth is a critical determinant in a company's valuation, as it is closely linked to long-term stock performance. A company that grows swiftly and profitably tends to generate more value for its shareholders. FactSet Research Systems' 3-year average annual revenue growth rate of 11.5% and EBITDA growth rate of 13.3% are commendable, placing it in a strong position within the Capital Markets industry.
ROIC vs. WACC Analysis
An effective way to measure a company's profitability is to compare its Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC). Ideally, the ROIC should exceed the WACC to indicate efficient cash flow generation relative to the capital invested. FactSet Research Systems has an ROIC of 15.35, which is notably higher than its WACC of 8.58, suggesting a profitable investment of capital.
Concluding Thoughts
In conclusion, FactSet Research Systems (FDS, Financial) is currently trading at a price that aligns closely with its fair value. The company's financial condition is fair, and its profitability is strong. With growth rates that are competitive within the Capital Markets industry, FactSet Research Systems may be an attractive option for investors seeking stability. For a more detailed financial overview, investors can explore FactSet Research Systems' 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
