Is Now The Time To Put FactSet Research Systems (NYSE:FDS) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like FactSet Research Systems (NYSE:FDS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide FactSet Research Systems with the means to add long-term value to shareholders.

See our latest analysis for FactSet Research Systems

How Quickly Is FactSet Research Systems Increasing Earnings Per Share?

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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years FactSet Research Systems grew its EPS by 10% per year. That's a pretty good rate, if the company can sustain it.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for FactSet Research Systems remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.6% to US$2.2b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of FactSet Research Systems' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are FactSet Research Systems Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$17b company like FactSet Research Systems. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$32m worth of its stock. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. 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$13m.

FactSet Research Systems offered total compensation worth US$6.9m to its CEO in the year to August 2023. That is actually below the median for CEO's of similarly sized companies. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is FactSet Research Systems Worth Keeping An Eye On?

As previously touched on, FactSet Research Systems is a growing business, which is encouraging. 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. It is worth noting though that we have found 1 warning sign for FactSet Research Systems that you need to take into consideration.

Although FactSet Research Systems certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.