Financial Sector Ideas

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FactSet Research - >>> 2 Top Financial Services Stocks to Buy in October


Motley Fool

By Courtney Carlsen

Oct 7, 2023


https://www.fool.com/investing/2023/10/07/2-top-financial-services-stocks-to-buy-in-october/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

Financial markets rely on a multitude of companies to grow and evolve.

CME Group is the top derivatives exchange operator and benefits from volatile markets.

FactSet Research's trove of data helps investment professionals and provides recurring subscription revenue.

These finance companies have strong moats and are cash-generating machines.

Financial services companies form the backbone of markets, offering solutions from exchanges where market participants can buy or sell assets to data providers who help investment professionals make sense of troves of data. Companies that provide these crucial services can make solid investments because of their steady cash flows and ability to profit in different market conditions.

CME Group (CME 0.15%) and FactSet Research Systems (FDS 0.43%) are two stocks with excellent businesses. These companies have strong competitive advantages and favorable trends that benefit their business.

Here's why investors should consider buying these two stocks today.

FactSet Research Systems' data advantage has it positioned for long-term growth

FactSet Research Systems provides data and analytics to investors, including banks, hedge funds, asset managers, and individuals, to name a few. Its slew of economic and investment data is in high demand, giving it a robust economic moat. The company charges subscription fees for access to its data and software, which are a steady stream of recurring revenue.

Demand for FactSet's data is undeniable. Over the last decade, the company's annual revenue has gone from $870 million to $2.08 billion. Its free cash flow, or the cash flow left over after paying operating expenses and maintaining capital assets, has grown over the past 10 years from $250 million to $585 million.

There have been concerns that customers could cut costs, including data subscriptions. Thus far, that hasn't been the case. Through the first nine months of FactSet's fiscal year (ended May 31), FactSet's revenue of $1.5 billion and net income of $403 million are up 15% and 38%, respectively.

FactSet's data and software are in strong demand and should continue to experience growth in the years ahead. According to a report by Fortune Business Insights, the global financial analytics market is expected to grow by 11% annually through 2030. This should provide a long-term tailwind to FactSet's expansive data business, making this financial services stock another solid addition to your portfolio this October.

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