With financial data provider FactSet
Fourth-quarter revenues were up 27% to $105.2 million (19% of that was organic growth), while net income was up 26% to $23.4 million year over year. Free cash flow continued to explode, up 48% for the full year to $97.1 million. International growth was a key driver here, as non-U.S. revenue was up 38% (22% organic) year over year to $31 million, or nearly 30% of revenues. For the full year 2006, revenues were up 24% to $387 million, and net income was up 15.5% to $82.9 million.
However, with the stock premium priced at a P/E of 30-plus, investors have obviously cottoned on to the outstanding business prospects for FactSet. That's perfectly all right, even as the company continues to shrug off competitive pressures from other data providers like Reuters
Furthermore, a potential source of worry may be the hedge fund market. As 75% of FactSet's clients are buy-side (asset managers), hedge fund managers no doubt make up a small but important segment. Indeed, the SEC recently estimated that there are now 8,800 hedge funds that control about $1.2 trillion in assets, or roughly double the amount of assets over the SEC's 2003 estimate. While the assets may only be about 5% of the total U.S. assets under management, the funds are estimated to control about 30% of U.S. equity trading volume. As a result, I'm willing to postulate that they're heavy data consumers, and any potential shakeout in the industry, -- say, like the Amaranth blowup this week -- could damper business for hedge funds and, in turn, data providers like FactSet.
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