FactSet Research Systems Inc (NYSE:FDS) – A Quality Stock Worth Considering

FactSet Research Systems Inc (NYSE:FDS) was identified by our Caviar Cruise screen as a potential candidate for quality investors. The company demonstrates strong financial metrics, consistent growth, and efficient capital allocation, making it a compelling option for long-term investors. Below, we examine why FDS meets the criteria of a quality stock.

Key Strengths of FactSet Research Systems

• Revenue and EBIT Growth: FDS has delivered a 5-year revenue growth (CAGR) of 5.66%, while EBIT growth over the same period stands at 10.02%. This indicates improving profitability, a hallmark of well-managed businesses.
• High Return on Invested Capital (ROIC): The company’s ROIC (excluding cash and goodwill) is an impressive 231.49%, far exceeding the 15% threshold set by the Caviar Cruise screen. This suggests efficient use of capital.
• Strong Profit Quality: FDS converts net income into free cash flow at a rate of 120.10% (5-year average), well above the 75% benchmark. This reflects strong cash generation capabilities.
• Manageable Debt Levels: With a Debt-to-Free Cash Flow ratio of 2.48, FDS could repay its debt in under three years using current cash flows, indicating financial stability.

Fundamental Analysis Summary

Our fundamental report assigns FDS an overall score of 5 out of 10, with notable strengths in profitability and financial health. Key takeaways:

• Profitability: Scores 8/10, with high returns on assets (12.28%) and equity (24.73%).
• Financial Health: Scores 5/10, with a solid Debt-to-FCF ratio (2.48) and manageable leverage (Debt/Equity: 0.66).
• Valuation: Currently expensive (P/E of 26.68), but justified by strong profitability and growth prospects.
• Growth: Revenue and earnings have grown steadily, with analysts expecting continued expansion.

For investors seeking quality companies with durable competitive advantages, FDS presents a strong case. While valuation may be a concern, its financial discipline and growth trajectory make it a stock worth monitoring.

Our Caviar Cruise screener lists more quality stocks and is updated daily.
For a deeper dive, review the full fundamental analysis of FDS.

Disclaimer

This is not investment advice. The observations here are based on current data, but investors should conduct their own research before making decisions.