FactSet Research Systems Inc. (FactSet) (FDS, Financial) is a provider of global financial and economic information, including fundamental financial data on tens of thousands of companies worldwide. FactSet supports the investment process from initial research to published results for buy and sell-side professionals. These professionals include portfolio managers, research and performance analysts, risk managers, marketing professionals, sell-side equity research professionals, investment bankers and fixed income professionals. The company’s applications provide users access to company analysis, multi-company comparisons, industry analysis, company screening, portfolio analysis, predictive risk measurements, alpha testing, portfolio optimization and simulation, real-time news and quotes and tools to value and analyze fixed income securities and portfolios. As of Aug. 31, 2010, there were over 42,800 users of FactSet. On June 1, 2010, FactSet acquired Market Metrics Inc. Market Cap: $5.1 billion
Business Predictability: 5 stars
Industry: Information & Delivery Services
Valuation:
The subscription-based model offers consistency with recurring revenue and predictable cash flow. However, there is little to no margin of safety.
Ratios – P/E (ttm) 31.5X
P/S 7.44X
P/B 9.1X
EV/EBIT 20.9X
Discounted Cash Flow Analysis –
Financials:
Risk:
- Overvalued share price
- Highly competitive industry
- Difficult to differentiate product offering
Conclusion:
While FDS has built a tremendous reservoir of data to be sold via subscription, the company’s shares don’t offer much margin of safety. Continuing to build out the product offering thus creating greater switching costs will create shareholder value, yet the hurdles are steep.
The Buffett-Munger screener is designed to find Buffett-type investments with extraordinary profitability, consistency, and future prospects. Our monthly Buffett-Munger Best Bargains Newsletter picks one stock from the screener. Our in-depth analysis shares with you why younger Buffett and Munger would like this stock. If you are a premium member, you can download it here. If you are not, we invite you for a 7-day Free Trial.
Business Predictability: 5 stars
Industry: Information & Delivery Services
Valuation:
The subscription-based model offers consistency with recurring revenue and predictable cash flow. However, there is little to no margin of safety.
Ratios – P/E (ttm) 31.5X
P/S 7.44X
P/B 9.1X
EV/EBIT 20.9X
Discounted Cash Flow Analysis –
| 10 year growth | Margin of Safety |
| >15% | -9% |
| 10% | -56% |
| <5% | -96% |
| Book Value / Share | Return on Equity | Return on Assets | |
| Aug 2010 | $10.92 | 29.9% | 23.3% |
| Aug 2009 | $10.72 | 28.9% | 22.9% |
| Aug 2008 | $9.70 | 26.9% | 21.3% |
| Aug 2007 | $8.47 | 26.8% | 20.9% |
| Aug 2006 | $7.34 | 23.1% | 18.1% |
| Aug 2005 | $5.55 | 26.8% | 20.7% |
| Aug 2004 | $3.52 | 35.3% | 25.2% |
| Aug 2003 | $4.20 | 24.2% | 20.1% |
| Aug 2002 | $3.49 | 23.1% | 18.9% |
| Aug 2001 | $2.76 | 24.2% | 19.4% |
- Overvalued share price
- Highly competitive industry
- Difficult to differentiate product offering
Conclusion:
While FDS has built a tremendous reservoir of data to be sold via subscription, the company’s shares don’t offer much margin of safety. Continuing to build out the product offering thus creating greater switching costs will create shareholder value, yet the hurdles are steep.
The Buffett-Munger screener is designed to find Buffett-type investments with extraordinary profitability, consistency, and future prospects. Our monthly Buffett-Munger Best Bargains Newsletter picks one stock from the screener. Our in-depth analysis shares with you why younger Buffett and Munger would like this stock. If you are a premium member, you can download it here. If you are not, we invite you for a 7-day Free Trial.
