FactSet Profits Amid Turmoil: Under the Radar

BOSTON ( TheStreet) -- Goldman Sachs ( GS) and JPMorgan Chase ( JPM) have flourished this year as the Wall Street survivors snagged market share from defunct outfits like Lehman Brothers. The companies that build trading and analytics programs have enjoyed comparable success, but are receiving less attention from investors.

FactSet Research Systems ( FDS) designs applications for investment professionals. Its risk-management tools add value during market turmoil. So when financial markets swoon, FactSet's stock benefits. The company has achieved a three-year growth rate of 17% for revenue and 20% for profit.

The company's fiscal fourth-quarter net income rose 8% to $36 million, or 74 cents a share. Revenue inched up 1% to $156 million. Its gross margin remained steady at 72% and its operating margin grew from 33% to 35%. The company holds $216 million of cash and no debt.

FactSet has tailor-made applications for wealth managers, institutional asset managers, hedge funds and research professionals. Its platforms give clients access to proprietary data. It collects a swath of information from third-parties, and then compiles and organizes it for clients.

Money management and trading decisions are made in real-time. The only edge in the markets is through superior research and technological innovation. Professional investors are in a perpetual arms race to gain an edge in financial markets.

This trend has helped FactSet consistently grow profits since its inception in 1978. Its stock has doubled over the past five years and is up 265% over a 10-year period, far outperforming major U.S. indices. Shares have rallied 37% this year, more than the Dow Jones Industrial Average and S&P 500 Index.

FactSet trades at a price-to-earnings ratio of 23, a premium to the market, but a discount to application software peers. Shares pay a 1.3% dividend yield and have a beta, a measure of market correlation, of 1.4. We rate FactSet "buy."

-- Reported by Jake Lynch in Boston.

More from Opinion

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Time to Talk Tesla: What Happened This Week, Elon?

Time to Talk Tesla: What Happened This Week, Elon?