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Investing.com -- Raymond James upgraded FactSet Research Systems to Market perform from Underperform, saying the market-data provider’s shares already reflect most of the competitive and budgeting pressures that slowed growth over the past two years.
FactSet’s forward price-to-earnings multiple has slid to about 24 times, near a five-year low and roughly in line with the broader S&P 500, after historically commanding a premium, the brokerage said.
Analysts at RJ see limited further downside risk to FactSet’s valuation multiple given company’s largely recurring revenue, strong client-retention record and modest balance-sheet leverage.
The firm also cited an early pickup in Annual Subscription Value (ASV), a key measure of future revenue. Organic ASV growth, at constant currency, rose 40 basis points sequentially to 4.5% in FactSet’s fiscal third quarter ended May 31, breaking an eight-quarter deceleration.
Revenue growth improved by a similar amount to 4.4%, and management signalled a healthier sales pipeline heading into the fourth quarter.
Even so, Raymond (NSE:RYMD) James said spending constraints among investment-management clients and fiercer competition from London Stock Exchange (LON:LSEG) Group’s Refinitiv unit are likely to cap upside in the near term.
Budget pressures “will continue to limit revenue and ASV growth upside,” Raymond James analyst added.
Past increases in capital expenditures, including investments in generative-AI tools, have knocked about two percentage points off operating margins this fiscal year, but the brokerage expects that drag to “mostly abate in FY26” as capex levels off.
Raymond James left its earnings estimates unchanged, saying risk and reward now look “relatively balanced” after the stock’s de-rating.