FactSet Research Systems (FDS): Gaining market share

By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 4/9/13. Sign up for free Cabot Wealth Advisory

FactSet Research Systems (FDS)
was founded in 1978 and has its main office in Norwalk, Connecticut. The company provides global economic and financial data to investment professionals, such as portfolio managers, analysts and investment bankers. FactSet combines data from hundreds of sources into a single online information library, accessible from numerous devices using a private network.

The network provides a direct, high-speed data link between FactSet’s mainframe computers and the client’s personal computer or network. The system allows users to download, search and analyze data in a variety of formats, including custom-designed reports. FactSet offers data on thousands of companies around the world.

Sales and earnings growth has continued unabated, because FactSet is taking market share from competitors such as Bloomberg, Dow Jones, Morningstar and Thomson-Reuters. FactSet’s first-class customer service and unique data sets have become a big advantage. The recent shift from bond mutual funds to stock mutual funds could enable FDS to beat 2013 forecasts. The company derives more than 80% of revenues from the mutual fund industry.

Sales will likely increase 10% and EPS should rise 12% during the next 12-month period ending 2/28/14. At 18.8 times my forward EPS forecast of 4.83 and with a dividend yield of 1.4%, FDS shares are a little high. The company’s superior sales, earnings, and dividend growth warrants the higher valuation. FactSet has paid dividends since 1999 and increased its dividend more than 10% every year since 1999. I expect another hefty dividend increase before mid-year. Buy FDS now with the expectation the stock price will rise to 111.11 within one year.

Editor’s Note:
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