Whether or not the concept of "buy what you know" is all it's cracked up to be is a topic that I'll tackle soon.
But not today. What I can say, though, is that if I had bought what I knew and purchased shares of FactSetResearch
In my view, that gain in market value has been well-earned and the company continues to perform well. For its fiscal fourth quarter, sales grew over 22% as the company added more clients, more users, and more subscriptions. Profitability also improved, as operating income climbed 24% and net income rose 27%.
Not only is profitability still on the upward path, but so is cash flow generation. Although operating cash flow climbed just 14% for the full year, free cash flow was up 62%. Structural free cash flow, which ignores the benefits and detriments of changes to working capital, doubled as well.
I happen to think there's still ample room for FactSet to grow. As much as FactSet has grown to this point, it still looks like a minnow next to the likes of Bloomberg, Thomson
Although it's not a cheap stock, I don't think FactSet is really overpriced either. The company generates good free cash flow (and trades at a multiple roughly 22 times that cash flow), a solid return on equity, and a bit of a dividend. Much as I like bargains, I also realize that you shouldn't be all that surprised when you see the stock of a solid company carry a valuation that reflects both quality and growth expectations.
For more Foolish fact sets, check these out:
- Why Free Cash Flow Matters
- Good Morningstar.com
- Consistency Yields Growth for FactSet
- Soft Dollars, But Rock-Solid Profits
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).