FactSet stock price has crashed this year, mirroring the performance of other companies in the data services industry like MorningStar. FDS has dropped by 41% from its highest level in November, lowering its market capitalization from a high of $18.86 billion to the current $10.9 billion. Is it safe to buy the dip ahead of earnings?
FactSet stock dropped as growth momentum waned
FactSet Research Systems, a top company in the financial data industry, has come under pressure this year as its results showed that its business was slowing.
The most recent results showed that its revenue rose by 6.2% in the last quarter to $596 million, while its organic annual subscription value (ASV) rose by 5.7% to $2.37 billion.
These results, which missed analysts’ forecasts, also showed that its margins rose gradually. Its operating margin rose to 29.7% from the previous 29.3%. The management attributed this slowdown to an increase in amortization of intangible assets.
FactSet’s net income rose to $153 million in its fourth quarter of the fiscal year from $89 million in the fourth quarter of last year.
Most of FactSet’s business came from the United States, where the ASV rose to $1.484 billion, while the EMEA region rose to $572.4 million. The Asia Pacific region business rose to $229 million.
FDS earnings to provide color on its growth
The next important catalyst for the FactSet stock price will be its upcoming earnings, which will come out on Wednesday this week. These numbers will provide more color on the company’s growth trajectory.
Data compiled by Yahoo Finance shows that the company’s revenue will come in at $600 million, a 5.6% increase from the same period last year. Its forward guidance for the next quarter will be $603.2 million, a 5.71% increase, while the annual guidance is $2.44 billion.
Additionally, analysts expect the upcoming numbers to reveal that its earnings per share will drop from $4.37 to $4.36. There is a risk that the company’s real EPS will miss estimates, as it has done in the past two quarters.
One positive side of FactSet is that it is one of the top dividend aristocrats, as it has boosted its dividends for over 25 years. It spent $41.4 million to reward its shareholders through its dividend.
Another key positive is that the company has become a bargain, with its forward price-to-earnings ratio being 16, much lower than the five-year average of 28, and its forward EV-to-EBITDA of 13 being lower than the five-year average of 24. These numbers are also much lower than the S&P 500 Index average.
FDS stock price technical analysis
The weekly timeframe chart shows that the FDS stock price dropped from last year’s high of $491 in November to a low of $250 this year.
It is now attempting to rebound and is nearing the important resistance level at $300. Still, the stock remains much lower than the 50-week and 100-week Exponential Moving Averages, a sign that bears remain in control.
The stock has moved from the ultimate support of the Murrey Math Lines tool at $250 to slightly above the weak, stop, reverse at $281.
Therefore, the most likely scenario is where the stock continues rising as bulls target the psychological level at $350, which is slightly above the bottom of the trading range. This target price is slightly above the average analysts estimate.
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