December 21, 2009 - FactSet Research Systems (FDS-NYSE) provides financial and economic information on various companies, analytical applications, and client services to portfolio managers, research and performance analysts, risk managers, marketing professionals, sell-side equity research professionals, investment bankers, and fixed income professionals worldwide.

It combines commercial databases, including content regarding companies and securities from various markets into a single online platform of information and analytics. The company's solutions for investment management professionals include analyzing companies, benchmarks, debt instruments, and economic series; researching real-time data; studying portfolio performance for equities and fixed income securities; building quant models and calculating risk; integrating the client's own data, such as portfolio holdings and research notes; creating reports and presentations; and viewing event transcripts and corporate event calendars.

Its solutions for investment banking professionals comprise tracking market performance and headlines; researching public and private companies on one platform; auditing financials underlying SEC filings and annual reports; managing relationships and tracking the people that drive each industry; searching prospectuses, SEC filings, and M&A documents; building financial models and presentations; providing access to reports via wireless handheld devices. The comapany was founded in 1978 and is headquartered in Norwalk, Connecticut.

You would think a company that delivers financial data and information to investment managers and bankers would have had a couple of bad years, given that the market really had a tough decade with the exception of 2009. But FDS didn't. In fact, earnings were up every year. In 1999, they were 37 cents a share. By 2005, they hit $1.39, then $1.57, followed by $2.14 and $2.50. Last year (fiscal year ends in August), they reached $2.91. Consensus from 9 analysts following the company is for $3.01 this year and $3.30 next year. Over the last 5 years, earnings grew by an average annual rate of 21.5% while revenues were up by an average of 20.5%. For the next 5 years, analysts see sales increasing by 15.5% a year, on average, and earnings by 16% a year, on average.

Part of the reason for FDS's consistently strong earnings is its recurring revenues model. Clients sign up for years of service at a time. As they use various programs to analyze the market or data for mergers or other applications, customers realize the power at their fingertips to do so much more than they initially thought. They order more services the more they use FDS.

That certainly was the case in the fourth quarter (ends in August). There was noticable improvement in certain benchmarks such as an increase in annualized subscription value, more clients and higher user count, compared to the third quarter. These same metrics were contracting in the previous quarters. It seems as if the company's client base felt confident enough to increase usage as the market improved. While revenues only grew by 1% (year over year comparison), earnings were up 10% thanks to wider margins.

Looking back to 2008, there were reasons for investors' concern over FDS. The stock swooned from a high of $68 to a low of $31.20 before it began its revival. In 2008, Lehman Brothers collapsed. So did other financial services firms. The future looked gloomy for Wall Street and all the companies supplying it with data and information. Since then, all asset classes have stabilized or recovered some of their losses. Financial services firmed have either been absorbed (Merrill Lynch into Bank of America as an example) or increased capital to remain open. But even with all the turmoil, FDS increased its earnings per share, going from $2.14 in 2007 to $2.50 in 2008. Give management credit for steering the FDS ship through turbulent waters.

More numbers: Market Cap is $3.05 billion. Forward P/E is 19.5. Price to Book is 6.11. Book value is $10.72. Operating margin for the last 12 months was 33.93% while Profit margin was 23.30%. Return on equity was a remarkable and commendable 30% while Return on assets was 23.30%. Total cash is $216.32 million which is $4.57 a share. There is no debt. Current ratio is 3.01. Beta is 1.4. The 52-week low was on March 9, 2009 at $35.56. The 52-week high was $76.76 reach on December 14, 2009. There are 47.30 million shares outstanding with a float of 42.66 million. Insiders own 9.86%. Institutions own over 90%. There is a dividend of 80 cents a share, up from 66 cents last year, with a current yield of 1.2%.

This stock showed an ever increasing price from 2002 to 2007. Then concerns entered investors' minds as Wall Street seemed to collapse. But the company did more than survive the tough times. It thrived by cutting costs and improving its services. While the stock reflected the nervousness of investors, its intrinsic value remained strong. Investors are back on board, enthusiastically pushing the price to a new all time high only a few days ago. Can it keep going? If it keeps improving earnings every year, it will.

- Company Web site: www.factset.com

- Ted Allrich