Broadridge Financial Solutions (NYSE:BR) bills itself as the world's largest processor of investor communications. This includes over 1 billion communications made annually, including sending proxy materials and related investor reporting. The business isn't growing rapidly given the firm's dominant market share, but the business is predictable and highly profitable.
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Third Quarter Recap
Revenues increased 7% to $527 million on a recurring basis. This excludes such items as the sale of its securities clearing business to Penson Financial Services (Nasdaq:PNSN) that also included an 11-year outsourcing contract. Of the two main segments, investor communications grew 3.5% to account for 70% of the total top line and benefited from strong retention of existing clients as well as acquisitions. Securities processing made up the rest of revenue and grew an impressive 15.2%, primarily on acquisitions as well as higher trading volumes.

Operating income advanced 5.6% to $51.1 million as both divisions saw steady profit growth. Slow income tax expense growth and a drop in losses from discontinued operations helped send net income up by 19.3% to $29.7 million. Share buybacks helped push per-share earnings up 27.8% to 23 cents per diluted share. This came in ahead of analyst projections.

Outlook
For the full year, Broadridge anticipates sales between $110 million and $150 million and earnings in a range of $1.30 and $1.40 per diluted share. Its cash flow guidance calls for between $140 million and $200 million in free cash flow, or approximately $1.09 and $1.56 per diluted share.

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Bottom Line
Broadridge shares are up about 20% since they were spun off from payroll giant ADP (NYSE:ADP) back in 2007. It has kept pace with the broad market but handily outperformed financial services firm Thomson Reuters (NYSE:TRI). FactSet (NYSE:FDS) has jumped more than 60% during this period, but now trades at a lofty forward P/E of nearly 31. Broadridge looks like a bargain in comparison at a forward multiple of just over 14. However, the company faces challenges in consistently growing its sales and profits going forward, given its already dominant market share.

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