Shares of FactSet Research Systems Inc. FDS have rallied 28.7% in the past three-month period, primarily on high client retention rate, strategic acquisitions and investor-friendly steps.
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Reasons for Upside
FactSet’s growing customer base, high client retention rate (91%), solid revenue growth and a competitive pricing strategy should positively impact results over the long term. For third-quarter fiscal 2022, FDS’s Annual Subscription Value (ASV) plus professional services were $1.94 billion, up 19.8% year over year.
Buy-side and sell-side ASV growth rates were 9.6% and 12.9%, respectively. Organic ASV plus professional services were $1.78 billion, up 10.1% from the prior-year quarter’s level. Nearly 84% of organic ASV was generated by buy-side and the rest by sell-side firms. In fiscal 2021, organic revenues improved 6.3% to $1.59 billion. FactSet added 578 clients in fiscal 2021, taking the total number to 6,453.
Over the years, FactSet made several acquisitions to expedite growth. FDS’s March buyout of CUSIP Global Services (CGS) from S&P Global for $1.925 billion is expected to enhance its position in the global capital markets.
Other noticeable acquisitions include the takeovers of BISAM, IDMS, Portware LLC, Code Red, Revere Data LLC, StreetAccount, etc. These transactions are aimed at helping FactSet broaden its product suite by delivering innovative products and evolving it as a global financial database entity.
We are impressed with FactSet’s consistent efforts to reward its shareholders in the form of share repurchases and dividend payments. During fiscal 2021, FDS bought back shares worth $264.7 million and paid out dividends of $117.9 million. Such moves indicate its commitment to creating value for shareholders and underlining its confidence in its business.
Favorable Estimate Revision
Driven by the above tailwinds, the Zacks Consensus Estimate for current-year earnings has moved marginally north to $13.52 in the past 60 days.
Zacks Rank and Stocks to Consider
FactSet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are like Avis Budget Group, Inc. CAR, Genpact Limited G and CRA International, Inc. CRAI.
Avis Budget sports a Zacks Rank #1 (Strong Buy) at present. CAR has an earnings growth rate of 108.4% for 2022. You can see the complete list of today’s Zacks #1 Rank stocks here.
Avis Budget delivered a trailing four-quarter earnings surprise of 69.5%, on average.
Genpact carries a Zacks Rank #2 (Buy) at present. G has a long-term earnings growth expectation of 12.3%.
Genpact delivered a trailing four-quarter earnings surprise of 10.1%, on average.
CRA International carries a Zacks Rank of 2, currently. CRAI has a long-term earnings growth expectation of 14.3%.
CRAI delivered a trailing four-quarter earnings surprise of 26%, on average.
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