Last Update05 Oct 25Fair value Decreased 2.07%
FactSet Research Systems’ analyst price target has been revised lower to $339.25 from $346.44, as analysts cite ongoing concerns about investment-related margin pressure and prolonged uncertainty around profit growth. This comes despite some positive views on the company’s competitive positioning.
Analyst Commentary
Recent research updates reflect a mix of optimism and caution in the analyst community regarding FactSet Research Systems, with shifts in ratings and price targets highlighting both strengths and headwinds facing the company. Below are the primary themes emerging from this commentary.
Bullish Takeaways- Bullish analysts believe FactSet's core franchise remains highly "sticky," and its solutions are integral in a slow-moving industry. This supports long-term client retention even amid market change.
- Some see current valuation as underappreciating FactSet's ability to adapt quickly to artificial intelligence trends. The firm has already demonstrated rapid AI integration.
- There is optimism that new leadership could unlock "easy wins" through a refreshed strategic focus, especially in wealth management and competitive disruption opportunities.
- The possibility of FactSet becoming an acquisition target has been raised given recent multiple de-ratings. Private equity is considered a likely buyer due to potential attractive returns under various scenarios.
- Bearish analysts cite persistent margin pressures due to ongoing investments in technology and growth initiatives, which could weigh on profitability in the near term.
- There is concern that increased spending may be required merely to maintain competitive positioning rather than drive meaningful acceleration in growth, raising questions about long-term returns.
- Uncertainty surrounding the duration and payoff of the existing investment phase has led to a cautious outlook, with some analysts lowering price targets and downgrading ratings.
- While organic annual subscription value remains solid, guidance for future quarters has been described as conservative and competitive pressures from AI advancements are noted as risks to future performance.
What's in the News
- FactSet has integrated IntelligentCross' JumpStart functionality into the Portware execution management system, making it the first in its competitor set to offer direct buy-side integration with Jefferies' low-touch algo liquidity. This aims to enhance order matching and price stability for equity trading. (Key Developments)
- The company has completed a major share buyback, repurchasing 683,911 shares representing 1.8% of shares outstanding for $300 million, as part of a plan announced in September 2024. (Key Developments)
- FactSet issued fiscal 2026 guidance, projecting GAAP revenues between $2,423 million and $2,448 million, GAAP diluted EPS from $14.55 to $15.25, operating income of $720 million to $750 million, and net income of $550 million to $577 million. (Key Developments)
- The Board amended and restated the company's Bylaws to clarify election procedures for directors. The changes introduce additional guidelines for majority and plurality voting standards in both contested and uncontested elections. (Key Developments)
- FactSet launched the integration of MarketAxess' AI-powered CP+ bond pricing data within the FactSet Workstation, giving users exclusive access to real-time bond pricing on approximately 40,000 global securities directly in their workflow. (Key Developments)
Valuation Changes
- Consensus Analyst Price Target has decreased from $346.44 to $339.25, reflecting a modest decline in perceived fair value.
- Discount Rate has risen slightly from 8.45% to 8.48%, indicating marginally higher risk or required return expectations.
- Revenue Growth estimate has edged down from 5.41% to 5.39% annually, pointing to a slightly lower growth outlook.
- Net Profit Margin is projected to decrease from 25.64% to 25.37%, suggesting modestly compressed profitability expectations.
- Future P/E ratio has fallen slightly from 23.45x to 23.24x, implying a small reduction in anticipated earnings multiple.
Key Takeaways
- Integration of acquisitions and new GenAI products is expanding service offerings and supporting revenue and ASV growth.
- Enhanced data solutions and operational productivity improvements are poised to sustain margins and bolster future revenue.
- Rising technology costs and asset management challenges may pressure FactSet's margins and hinder growth, with uncertain market conditions affecting revenue consistency.
Catalysts
About FactSet Research Systems- Operates as a financial digital platform and enterprise solutions provider for the investment community worldwide.
- FactSet is integrating new acquisitions like Irwin and LiquidityBook, adding immediate cross-sell opportunities and expanding services across buy-side and banking workflows, which will support revenue growth.
- The launch of new GenAI products, including Pitch Creator and conversational API, is expected to provide additional services that drive adoption and increase ASV growth, positively impacting future revenue.
- The company is implementing strategic initiatives in its wealth management segment, securing partnerships like the UBS deal, and this broad market share in the wealth sector should contribute to sustained ASV growth.
- FactSet is increasing its focus on data feeds, benefiting from strong demand for high-quality data solutions, which should bolster future revenue and margin expansion through increased enterprise-level sales.
- Focus on operational productivity, such as reducing third-party content costs and enhancing workforce efficiency through automation, underpins the company's confidence in maintaining its operating margins despite recent acquisitions.
FactSet Research Systems Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming FactSet Research Systems's revenue will grow by 5.7% annually over the next 3 years.
- Analysts assume that profit margins will increase from 23.3% today to 27.0% in 3 years time.
- Analysts expect earnings to reach $730.7 million (and earnings per share of $20.08) by about September 2028, up from $532.9 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.6x on those 2028 earnings, up from 26.5x today. This future PE is greater than the current PE for the US Capital Markets industry at 26.7x.
- Analysts expect the number of shares outstanding to decline by 0.48% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.33%, as per the Simply Wall St company report.
FactSet Research Systems Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The slowing price increases tied to lower CPI levels could negatively impact FactSet's revenue growth, as demonstrated by a nearly $7 million headwind to ASV growth this quarter.
- Persistent challenges in the asset management and banking sectors, including ongoing cost rationalization and budget tightening, pose risks to revenue and retention which could unfavorably affect net margins.
- The market environment remains uncertain, particularly for banking, which has been a drag on growth; this uncertainty may continue to suppress revenue growth despite potential wins with new products.
- Increased technology expenses, noted as 31% higher mainly due to greater cloud and software costs, could pressure operating margins and require significant cost efficiencies elsewhere to offset.
- The execution risks tied to international expansion, given mixed results in regions like EMEA, could lead to inconsistent revenue performance and impact overall growth expectations.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $428.375 for FactSet Research Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $500.0, and the most bearish reporting a price target of just $355.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $730.7 million, and it would be trading on a PE ratio of 27.6x, assuming you use a discount rate of 8.3%.
- Given the current share price of $372.86, the analyst price target of $428.38 is 13.0% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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