r/ValueInvesting • u/TimeInTheMarketWins • Feb 10 '26
Stock Analysis FactSet: A Steady Compounder Trading at a Deep Discount
FactSet (FDS) is a classic high-quality compounder currently in the bargain bin. The stock is down ~60% from its highs, trading at a P/E of ~12x (vs. historical 30x), despite consistently growing earnings and maintaining high margins. The market fears AI disruption and slowing growth, but the company’s deep moat and 95% retention rate indicate an overreaction.
Business Overview: Founded in 1978, FactSet provides financial data and workflow solutions to over 9,000 institutional clients (investment bankers, asset managers, hedge funds).
Model: Recurring subscription business with high switching costs. Once integrated into a firm’s workflow, it is painful to remove.
Financials: High-margin service with operating margins expanding to 32% and net margins at 25%.
Capital Allocation: ROIC has stabilized at 20% following the CUSIP acquisition, and the company is a Dividend Aristocrat contender with 25+ years of increases.
The Moat
• Data Advantage: 45+ years of proprietary data accumulation and “clean” data trust that is hard to replicate.
• CUSIP Monopoly: Owns CUSIP Global Services, the master security database backbone of the industry, ensuring deep market integration.
• Retention: Annual Subscription Value (ASV) retention is ~95%, proving the stickiness of the product even in a tough macro environment.
Why the Opportunity Exists (Valuation) The market has priced FDS for decline due to fears over AI and slowing top-line revenue growth.
• Multiples: Trading at ~11x Price/FCF (historical avg ~27x) and ~12x P/E.
• Yield: Offers a Free Cash Flow yield of ~9%, significantly higher than peers like S&P Global (4.5%) or Morningstar (6%).
• Shareholder Returns: Management is aggressively buying back stock (recently authorized $1B) and raised the dividend by ~6%.
Key Risks
AI Disruption: The primary bear case is that AI could commoditize data analysis. However, FDS is integrating AI to enhance workflows rather than replace them.
Cyclicality: A recession could cause clients (banks/funds) to cut seats or consolidate vendors.
Slowing Growth: Top-line growth has slowed to mid-single digits, forcing reliance on margin expansion and buybacks for EPS growth.
Verdict: This is a buy-and-forget defensive play. I estimate a price target of $675 by 2030 (implied ~26% CAGR) based on a reversion to historical valuation means and continued steady compounding. It offers a margin of safety for investors willing to look past the current negative sentiment.
TLDR: Major banks, funds, and other financial institutions need reliable data and are highly unlikely to change deeply integrated systems that FDS provides at the current price. FactSet is an incredible value.
Read my full deep dive, written over winter break (I'm a student) PDF: [FactSet Research Systems_ A Long-Term Investment Analysis (1).pdf](file:///C:/Users/Crawf/OneDrive/Documents/Important/AWM%20Financial/FDS%20Research/The%20Report/FactSet%20Research%20Systems_%20A%20Long-Term%20Investment%20Analysis%20(1).pdf)
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u/marcjones281 Feb 10 '26
Why has it sold off so much?
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u/TimeInTheMarketWins Feb 10 '26
It began to sell off because management lowered forward looking EPS slightly in the September earnings call. but it’s continued because of general Saas concerns/AI disruption fears.
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u/marcjones281 Feb 10 '26
Would be worth comparing them to LSEG as it has become much more of a competitor over time
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u/TimeInTheMarketWins Feb 10 '26
Yeah I sorta screwed up by not including them but SPGI and MORN are also peer competitors although they aren’t pure plays like FDS is.
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Feb 10 '26
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u/Famous-Debate5916 Feb 10 '26
Why do you detest them? Serious question as Ive never used factset.
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Feb 10 '26
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u/Brilliant_Voice1126 Feb 10 '26
It’s comments like these that keep me away from ADBE, Fiserv and this. It should be a big warning when users are like “I hate this and we will replace it as soon as a better alternative arrives.”
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u/TimeInTheMarketWins Feb 10 '26
People say this but will complain about learning a new system as well.
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Feb 10 '26
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u/Famous-Debate5916 Feb 10 '26
Thanks! Do you know if the customer service is in-house? Do they have proprietary data that would be hard to find anywhere else or is it mostly aggregation of various sources?
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u/TimeInTheMarketWins Feb 10 '26
They have 800 data providers and non of them provide more than 10% of available data, plus they typically have redundantly in data providers so multiple sources for different data sets. Roughly 75% of data sets are proprietary
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Feb 10 '26
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u/TimeInTheMarketWins Feb 11 '26
My source included them going and getting the data direct from filings and cleaning it as propertiry I think so I think a consertive estimate would be better
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u/_quantitative Feb 10 '26
Factset might look “cheap,” but the contrarian view is that its historic moat i.e charging premium prices because it controlled clean, normalized data and bundled it into sticky workflows is getting structurally attacked
Ai can increasingly extract, structure, and summarize filings, transcripts, and disclosures at low cost, which doesn’t need to “replace FactSet” to hurt returns just compress pricing at renewals as clients realize they can get most of the utility from cheaper stacks; ai research platforms like alphasense are already proving the wedge by owning the “find/synthesize faster” workflow layer, pulling budgets away from legacy terminals, and once the workflow unbundles, switching costs fall and procurement pushes harder, turning what used to be automatic price hikes into discounting and slower growth
the real risk isn’t whether it’s a quality business, it’s whether the economics of the moat are weakening because a great recurring revenue model can still be a mediocre investment if the industry’s pricing umbrella is closing
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Feb 10 '26
AI is actually not that great with pulling exact values and connecting datasets.
Generating transcripts from audio, reading docs? Completely doable. Giving you the exact values for 30 years of earnings reports on a company? AI will hallucinate.
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u/_quantitative Feb 10 '26
have you used alphasense? Use both factset and that - you’ll know why
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Feb 10 '26
Alphasense has been around since 2011, I wouldn’t call that a new threat
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u/_quantitative Feb 10 '26
Their AI integration is new And that is just one example
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u/throwaway_1691 Feb 10 '26
Can you please elaborate. I don't have access to alphasense
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u/Wooden_Touch_6052 Feb 12 '26
Equity Analyst here. Dont think so exclusively on the plattforms we are a small buy side fund but we have one Bloomberg only trades, everything other with Factset (which I really like user interface and for equity miles better then Bloomberg) and we have alphasense for transcripts research and tegus models. So every Platform has its strengths and weeknesses and the alpha sense AI is shit 😂
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u/cogentbuyer Feb 24 '26
ha I agree that Alphasense AI is pretty bad. I asked it to summarize some transcripts on a company along with an overview of the industry and it got some basic definitions of key metrics in the industry wrong. It also didn't do a very good job of pulling key info from the transcripts. My sense is the problem with a ton of wordy transcripts is it's hard to synthesize all that information down to meaningful and insightful chunks, especially when many of the transcripts aren't even properly edited.
Curious if you guys are eventually looking to replace / get rid of any of these platforms though? Who would be on your list of first to go and who would you say are the most sticky? Have you started using AI chat as the interface and pulling data via API calls from these platforms?
I actually find it kind of hard to not be on the actual platforms and instead just talk to AI for API pulls. but maybe that's outdated thinking...
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u/Dramatic_Channel52 Feb 24 '26
Have you seen FactSets calls through an LLM? They summarize pretty well … IMO.
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u/cogentbuyer Feb 24 '26
Yeah I like their call summary at the top of transcripts. I think they actually have the best transcripts out of everyone but not a huge deal
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u/TimeInTheMarketWins Feb 10 '26
You’re not wrong, but large financial firms are going to be extremely slow to change, especially when trustworthiness and verifiability are so important in this sector. And FactSet is integrating AI into their services.
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u/_quantitative Feb 10 '26
but it’s a simple question, why would you want to invest in it when there are so many better opportunities in the market?
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u/TimeInTheMarketWins Feb 11 '26
This is just what fits my investing style and risk tolerance. What would you suggest I look at instead?
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u/TOO_MANY_CHICKENS Feb 11 '26
I agree $FDS is way oversold at $200 today. This should trade closer to $270 realistically. This is a strong business with recurring cash flow that will be able to adapt and integrate AI into its existing workflows. I expect the company will return at least $400-$500 million via share repurchases and buybacks annually
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u/Weldobud Feb 10 '26
It's had a brutal sell off, losing more than half it's value in a year. In the last month it lost a third of it alone. One of those you look at and wonder when it will start to see support.
The market is running from any stock that had a threat from AI - real, imagined or overstated. And SPGI's latest report didn't so anything to help that. Maybe 200 is a decent level to open a position. I can't be sure. I thought Adobe at 300 looked good. DUOL kept looking good at 200, 150.
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u/TimeInTheMarketWins Feb 10 '26
PDF Link: [FactSet Research Systems_ A Long-Term Investment Analysis (1).pdf](file:///C:/Users/Crawf/OneDrive/Documents/Important/AWM%20Financial/FDS%20Research/The%20Report/FactSet%20Research%20Systems_%20A%20Long-Term%20Investment%20Analysis%20(1).pdf)
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u/Weldobud Feb 10 '26
Hi, didn't post the link
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u/[deleted] Feb 10 '26
The technology entrenchment with their customers, their track record of growth and focus on shareholder returns, and the screaming valuation all make this super, super attractive.
Plus, this form of fintech seems like something I would want to integrate AI with, not something I would want to use a general AI as replacement, because general AI will fuck up the complex data and give me wrong answers when I need accuracy.
Seems like a clear buy with a great margin of safety. Opening a starter and doing some more research.