FactSet Research Systems Inc (FDS, Financial) has shown a daily gain of 1.58% and a three-month gain of 16.06%. The company's Earnings Per Share (EPS) stands at 13.05. In light of these figures, the question arises: is the stock fairly valued? This article provides an in-depth analysis of FactSet Research Systems' valuation, diving into the company's financial performance and prospects.
Company Introduction
FactSet Research Systems is a key provider of financial data and portfolio analytics to the global investment community. The company aggregates data from various sources, including third-party data suppliers, news sources, exchanges, brokerages, and contributors into its workstations. It also provides essential portfolio analytics that companies use to monitor portfolios and address reporting requirements. FactSet Research Systems has made several strategic acquisitions to strengthen its offerings, including Portware, BISAM, and CUSIP Global Services.
Comparing the current stock price of $444.47 to the GF Value, which estimates the stock's fair value at $469.43, it appears that the stock is fairly valued. The following sections delve deeper into this valuation and the company's financial performance.
Understanding GF Value
The GF Value is a measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. It provides an overview of the fair value at which the stock should ideally be traded.
If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. At its current price of $444.47 per share, FactSet Research Systems, with a market cap of $17 billion, is estimated to be fairly valued.
Since FactSet Research Systems is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. FactSet Research Systems has a cash-to-debt ratio of 0.27, which ranks worse than 82.38% of 755 companies in the Capital Markets industry. Based on this, GuruFocus ranks FactSet Research Systems's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. FactSet Research Systems has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $2 billion and Earnings Per Share (EPS) of $13.05. Its operating margin is 31.61%, which ranks better than 71.86% of 636 companies in the Capital Markets industry. Overall, the profitability of FactSet Research Systems is ranked 10 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of FactSet Research Systems is 8.8%, which ranks better than 53.38% of 680 companies in the Capital Markets industry. However, the 3-year average EBITDA growth rate is 6.6%, which ranks worse than 60.48% of 463 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. For FactSet Research Systems, the ROIC is 16.21, while the WACC is 9.16.
Conclusion
Overall, FactSet Research Systems (FDS, Financial) stock is estimated to be fairly valued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 60.48% of 463 companies in the Capital Markets industry. To learn more about FactSet Research Systems stock, you can check out its 30-Year Financials here.
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