FactSet (FDS, Financial), a financial intelligence provider to the investment community, increased 4.1% in the quarter and helped performance in the period by 18 bps. FactSet shares increased as the company’s revenue growth accelerated with improved margins, as recent investments continue to generate strong returns. FactSet’s revenue growth accelerated due to the introduction of new tools, which the company has begun to sell to both new and existing clients. This has led to increased pricing power and new use cases without any change in retention rates. We expect further revenue and earnings growth in 2022 and beyond, as well as improved cash flow from its recent CUSIP acquisition. FactSet will likely use its increased cash flow for additional acquisitions and share repurchases. FactSet’s prospects remain favorable due to its large addressable market, strong financial technology expertise, and consistent execution on both new product development and financial results.
Shares of FactSet Research Systems, Inc., a leading provider of investment management tools, contributed to performance. While some investors may have been looking for slightly greater margin expansion, the company overall continued to perform quite well, and earnings demonstrated strong revenue growth. We retain conviction in FactSet due to the large addressable market, consistent execution on both new product development and financial results, and robust free cash flow generation.
From Ron Baron (Trades, Portfolio)'s Baron Focused Growth Fund third-quarter 2022 commentary.
