Yahoo Finance If EPS Growth Is Important To You, FactSet Research Systems (NYSE:FDS) Presents An Opportunity
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like FactSet Research Systems (NYSE:FDS). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out 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. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years FactSet Research Systems grew its EPS by 5.6% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
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. While we note FactSet Research Systems achieved similar EBIT margins to last year, revenue grew by a solid 18% to US$1.9b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for FactSet Research Systems?
Are FactSet Research Systems Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$15b company like FactSet Research Systems. But we are reassured by the fact they have invested in the company. To be specific, they have US$13m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.09% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like FactSet Research Systems, with market caps over US$8.0b, is about US$13m.
The FactSet Research Systems CEO received US$6.6m in compensation for the year ending August 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Is FactSet Research Systems Worth Keeping An Eye On?
One positive for FactSet Research Systems is that it is growing EPS. That's nice to see. The growth of EPS may be the eye-catching headline for FactSet Research Systems, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for FactSet Research Systems that you should be aware of.
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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