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On Thursday, analysts at Raymond (NSE:RYMD) James reiterated their Underperform rating on shares of FactSet Research Systems (NYSE:FDS), following the company’s second-quarter financial results for fiscal year 2025. The company, currently valued at $16.6 billion, trades at a P/E ratio of 30.9x and maintains strong profitability with a gross margin of 54.3%. According to InvestingPro data, six analysts have recently revised their earnings downward for the upcoming period. The firm’s analyst, Patrick Tyler Brown, commented on the company’s performance and outlook, expressing concerns over FactSet’s transition from a consistent growth entity to a more cyclically affected business facing strong competition.
FactSet, known for providing financial information and analytical software to the investment community, reported a sluggish start to the fiscal year 2025 in terms of net sales activity, with revenue growth of 5% in the last twelve months. The company has indicated a robust sales pipeline for the latter half of the year, suggesting that the second quarter might represent a low point for organic Annual Subscription Value (ASV) growth. Notably, InvestingPro highlights that FactSet has maintained dividend payments for 27 consecutive years, demonstrating consistent shareholder returns despite market cycles.
Despite this potential for improvement in ASV growth, Raymond James highlighted the irregularity of sales as a sign that FactSet has shifted away from its previous status as a secular growth company. The analyst pointed out that this shift is likely to result in lower revenue growth and margin expansion when compared to previous years.
The assessment also took into account FactSet’s recent acquisitions of Irwin and LiquidityBook, which were purchased at a combined 11.6 times acquired ASV. The analyst at Raymond James suggested that FactSet might have overpaid for these acquisitions as part of its strategy to stimulate growth.
Given these factors, along with FactSet’s current market valuation, Raymond James expressed the view that the risk/reward balance for investing in FactSet shares remains unattractive. The firm’s stance reflects caution regarding the company’s future performance in the competitive landscape of financial data providers. With a PEG ratio of 2.39 and trading at 8.3x book value, the stock appears richly valued relative to its growth prospects. For deeper insights into FactSet’s valuation and growth potential, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports.
In other recent news, FactSet Research Systems Inc reported its second-quarter earnings for fiscal year 2025, exceeding analysts’ expectations with an adjusted diluted earnings per share (EPS) of $4.28, surpassing the forecasted $4.21. The company also reported revenues of $571 million, slightly above the anticipated $570.13 million, marking a 4.5% year-over-year growth. FactSet reaffirmed its guidance for organic Annual Subscription Value (ASV) growth, narrowing the range to $100-130 million. Despite these positive results, the company’s stock experienced a pre-market decline. The company highlighted strategic acquisitions and product innovations, including the launch of six GenAI SKUs, as key drivers of its performance. FactSet’s organic ASV increased by 4.1% year-over-year, reflecting steady demand for its services. Analyst discussions during the earnings call focused on FactSet’s client retention strategies, with executives emphasizing their commitment to renewals and proactive contract management.
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