FDS reported Q3 08 earnings a few weeks ago. This is an update to the study I did in April. These notes are from the Earnings Call. The Co has not yet released the quarterly 10Q report; Nor are there any updates to the financial statements for the 3rd quarter.
Prediction Actual
Rev 14% 22%
EPS 13.5% 25%
PTM/OM 32.5% 32.5%
Tax Rate 35% 33.3%
Check PERT Report
From this data and these results, it appears that I was too conservative with my future growth assumptions. This can be a problem if being too conservative causes you to miss buying good companies. However, due to the purchase of Thompsons Fundamental Data Base, the EPS growth may be accurate through 2009.
The price of the stock was around $52, and the PE was 23.5 at the time of the study. It closed yesterday at $54.73 (PE 22.4)-an increase of 5.25%; not that impressive until you look at the S&P 500 which was down about 9% in that time. FDS had been as high as $64.44 since the study.
Other Points on Interest for FDS:
- Operating Income increased 22%-same as sales
- Free cash Flow and Net Income both increased about 22%
- There will be a 50% increase in the annual dividend
- Future Sales Subscriptions (Annual subscription value) increased 21% (20% organic growth and 1% growth from new sales). ASV is the Co.s best gauge for sales 12M into the future
- Client retention remains greater than 95%
- Tax rate is decreasing due to higher sales from Overseas customers
- FDS is buying Thompson Fundamental data base. That purchase will decrease the EPS by 0.03/share in Q4 08 and 0.04/share in each quarter of 09 (0.16/share for the year) This will decrease EPS growth in my SSG to around 8% for the next 5 quarters.
- Guidance for Q4 08; sales of $150M (16%) to $154M (19%)
To make a long story short, the Co. had an excellent Qtr. and is predicting good numbers for the rest of the year. There may be a pull back in the price of the shares due to the effect on earnings of the purchase of Thompsons. I believe it is a solid Co. The question is, "Is the price low enough now to make $$ buying additional shares?"
If you look at the updated SSG I attached, you see pretty conservative growth numbers, considering the trends of the past. I also used high and low PE ratios lower than the 5 year average. If you believe my PEs, the price is still a little high. If you bought additional shares at the current price, and sold them in 5 years at an average PE (21 on my SSG) you would be selling at 21 X $4.60, or $$96.60. That gives you a 77% increase in your investment (less than the 100% we want), and a compounded return of 12.03%. With the dividend yield of 1.32%, your total return would be 13.35%. If you use the average high and low PE from the last 5 years, you should "back up the truck". The shares will be selling at 25.4 (the average PE for the past 5 years) X $4.60 or $116.84. That would be an increase of 113.5% and a compounded return of 16.38%. With the dividend yield of 1.32%, your total return would be 17.7%
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