Yahoo Finance With EPS Growth And More, FactSet Research Systems (NYSE:FDS) Makes An Interesting Case
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like FactSet Research Systems (NYSE:FDS), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for FactSet Research Systems
FactSet Research Systems' Earnings Per Share Are Growing
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. FactSet Research Systems managed to grow EPS by 6.7% per year, over three years. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. FactSet Research Systems maintained stable EBIT margins over the last year, all while growing revenue 20% to US$2.0b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for FactSet Research Systems' future EPS 100% free.
Are FactSet Research Systems Insiders Aligned With All Shareholders?
Owing to the size of FactSet Research Systems, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. To be specific, they have US$15m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 0.09% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to FactSet Research Systems, with market caps over US$8.0b, is around US$12m.
FactSet Research Systems offered total compensation worth US$6.6m to its CEO in the year to August 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.
Does FactSet Research Systems Deserve A Spot On Your Watchlist?
One important encouraging feature of FactSet Research Systems is that it is growing profits. Earnings growth might be the main attraction for FactSet Research Systems, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Before you take the next step you should know about the 1 warning sign for FactSet Research Systems that we have uncovered.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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