Over the past week FactSet Research Systems (FDS) drew the heaviest interest from BetterInvesting members using our online stock study tools. Using the tools’ Member Sentiment feature, we can see that recent judgments depict a richly valued company with a slowing growth profile but, in the eyes of members, still possibly a hold candidate for their portfolios.
FactSet, a widely held stock among BetterInvesting members that provides data services to the financial industry, for many years offered the appealing “railroad track” sales and earnings growth lines on stock studies. Recent years have seen those lines’ slopes begin to decline, indicating slowing growth. This trend is typical for small companies as they mature.
Members in recent days have projected an average five-year annual sales growth rate of 8.5 percent, with earnings at 10 percent. The estimated average high P/E remains in the mid-20s, down a bit from the current valuation of 28.6.
The average judgments peg the potential return in the 7%-8% range. For BetterInvesting members using the Stock Selection Guide, this would put the stock’s price in the hold range — not so high that it merits a sale consideration but not low enough to offer sufficient potential returns for acquiring more shares or taking a new position.
Some might consider the stock’s current fundamentals and return potential a call to sell. But with a high-quality company such as FactSet, with excellent management as evidenced by historical pre-tax profitability and return on equity performance, decisions to sell shouldn’t be taken lightly.
Stocks are mentioned only for educational purposes. No investment recommendations are intended.