On Jun 6, 2014, we issued an updated research report on
FactSet Research Systems Inc.
FactSet has been witnessing growth in its Annual Subscription
Value (ASV), driven by new client wins. The company added 107 new
clients in the last reported quarter (second-quarter 2014) taking
the client tally to 2,632. We believe that the growing customer
base coupled with high client retention rate (95.0% of ASV) and a
competitive pricing strategy will positively impact results in the
The company has also been active on the acquisition front. To
expand its customer base, FactSet acquired Revere Data, LLC and
Matrix Data. It is worth mentioning that among the 107 new clients
added in the last quarter, 32 came from the Matrix acquisition.
These strategic acquisitions are aimed at helping FactSet deliver
innovative products and evolve as a global financial database
company. It will also help FactSet to maximize value for its
partners and provide customers with exclusive content sets.
Moreover, the company's strong balance sheet and cash flow
generating abilities enable it to enhance shareholder value though
dividends and share buybacks. These shareholder-friendly
initiatives not only instill investors' confidence but also
positively impact earnings per share.
However, FactSet operates in a very competitive segment
dominated by the likes of Bloomberg L.P., Dow Jones & Company
Inc. and Thomson Reuters with significantly greater financial,
technical and marketing resources. This leads to aggressive pricing
and thus, could result in market share loss for FactSet.
Despite the several positives associated with acquisitions,
integrating newly acquired businesses is a distraction for
management and consumes financial and other resources. The company
has previously faced integration issues with respect to its
acquisitions and this could continue in the future as well, given
the number of acquisitions. Also, the Revere and Matrix
acquisitions are expected to impact operating margins by 70 basis
points in the upcoming quarter.
Currently, FactSet has a Zacks Rank #3 (Hold). Investors may
consider other better-ranked stock like
). While Micron sports a Zacks Rank #1 (Strong Buy), Juniper and
SanDisk have a Zacks Rank #2 (Buy).
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