FactSet: Data Maven
This provider of financial information is expanding overseas, building business at home and bolstering client loyalty.
The research that investment pros use to analyze stocks doesn't come cheap. Subscribers of FactSet Research Systems know this. The data supplier, which does business with banks, money managers and brokerage firms, charges about $50,000 annually for a basic subscription. FactSet trolls more than 200 databases from research firms, stock exchanges and other sources and then repackages the data as a single online source of information on thousands of companies.
The Norwalk, Conn., company is busily building an empire. Through acquisitions, the company is expanding its business overseas and reducing its dependence on third-party data providers. FactSet (symbol FDS), has also been boosting subscriptions stateside -- and signing current subscribers up for more services at higher charges. These moves should "continue to drive growth for the foreseeable future," Zacks Equity Research analyst Steve Biggs wrote in a note to clients Friday. Biggs rates FactSet shares a "buy" with a six-month target price of $55. The stock, up 27% over the past year, closed Friday at $43.
One of the largest potential sources of FactSet's future revenue growth is a product that helps money managers analyze client portfolios. Portfolio Managers Workstation allows users to easily view the valuation and trading history of a portfolio's holdings, as well as measure its performance in relation to various benchmarks. FactSet recently partnered with MSCI Barra, a provider of benchmark indices, to enhance the product by using Barra's stock analytics. Biggs says Workstation will help FactSet maintain its 95% client retention rate. "Portfolio Managers Workstation is a unique product with high barriers to entry for would-be competitors because of extensive product development and strong client relationships," he writes.
International sales are another growth driver for FactSet. In the fiscal year that ended August 2005, the company sold $92 million in overseas subscriptions, up from $51 million in the previous fiscal year. The trend has continued so far this year. In the third quarter, which ended May 31, revenue grew 39% in Europe, and 32% in Asia.
FactSet has posted 39 straight quarters of revenue growth. During the third quarter of FactSet's 2006 fiscal year, the company reported revenue of $99 million, up 25% from the year-earlier period. Income rose 13%, to $31 million. The company, which will announce results for the fourth quarter of its fiscal year on September 19, expects revenue of $102 million to $105 million for the period.
FactSet trades at 24 times the $1.83 per share that analysts expect the company to earn in the fiscal year that ends in August 2007, according to Thomson First Call. That would be a gain of 17% from the $1.56 per share that analysts expect the company to earn in the current fiscal year.