RealMoney Silver - Insider Purchases & Buybacks: FDS

Insider Purchases & Buybacks: FDS
By Jason Raznick
RealMoney.com Contributor
2/5/2008 11:09 AM EST

While buybacks are not always a positive sign, continued buybacks signal that the company truly believes its stock has value. If you are looking for a tip-off from a creditable source, continued repurchase authorizations could well serve the purpose. FactSet Research Systems (FDS) has recently raised its buyback plan. (On Stockpickr, you can see the rest of the insider trades and buybacks portfolio.)

FactSet has been continuously buying back its shares. In the latest authorization, its board has approved an expansion of $125 million. Earlier this month, the company completed the repurchase of shares worth $100 million, the buyback expansion approved in March 2007. FactSet said it would buy back shares using existing and future cash generated by operations.

The company achieved robust growth in the fiscal first quarter ended Nov. 30. Revenue climbed 23.2% year-over-year to $134.2 million, and net income grew 23.4% to $29.4 million, or 58 cents a share. These results were achieved against the backdrop of the financial market turmoil. Despite clients becoming more cautious regarding their spending budgets, FactSet achieved an increase in subscriptions of $24.3 million during the quarter.

The company's main product offering is the Portfolio Manager Workstation, which has a solid client base. Once a user gets comfortable with this proprietary system, he becomes reluctant to make a switch. Since there is a learning curve involved, switching costs discourage customers from moving away from this platform. The PMW has been instrumental in helping FactSet maintain a very high client retention rate and an organic growth rate of around 20% and to generate robust cash flows.

FactSet projected revenues of between $137 million and $141 million for the second quarter of fiscal 2008. The company has been acquiring data providers to reduce its dependency on data vendors. It has also been increasing its overseas footprint. Earlier this month, Matrix Research upgraded its rating for FactSet from hold to buy. Zacks senior services sector analyst Steve Biggs reiterated a buy rating for the company, saying, "We expect the company to continue posting solid results over the next several quarters, with the potential for upside to our estimates."

You can see the list of investment funds that own the company at Stockpickr. Some of the funds that have recently raised their stakes in FactSet include:

T. Rowe Price New Horizons (PRNHX): Managed by John Laporte, this fund has a Morningstar rating of four stars. It has five-year returns of 20.48% and also holds NII Holdings (NIHD) , Henry Schein (HSIC) and FMC Technologies (FTI) .

Kayne Anderson Rudnick LLC: This fund invests primarily in energy-related master limited partnerships and their associated companies, and aims at a high after-tax return. It also holds Philadelphia Consolidated (PHLY) , Eaton Vance (EV) and Fair Isaac (FIC) .

Schwab Technology (SWTFX): Run by Larry Mano, this fund has a Morningstar rating of four stars. It has 5-year returns of 16.92% and also holds IBM (IBM) , Intel (INTC) and Microsoft (MSFT) .

The continued buyback indicates that FactSet sees value in its shares. The company is likely to continue to deliver healthy results based on its high client retention, strategic acquisitions and expanding international exposure. FactSet has a healthy balance sheet and has an return on equity of 28.45%.

Despite these positives, its shares are trading significantly below their 52-week high of $73.99. I believe this is the right time to invest in a company with such healthy fundamentals and bright prospects.

On Stockpickr, you can see the rest of the insider trades and buybacks portfolio.