Over the last six months, FactSet’s shares have sunk to $225.25, producing a disappointing 14.9% loss - a stark contrast to the S&P 500’s 6.4% gain. This may have investors wondering how to approach the situation.
Is there a buying opportunity in FactSet, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is FactSet Not Exciting?
Even though the stock has become cheaper, we don't have much confidence in FactSet. Here are two reasons why FDS doesn't excite us and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, market returns, and industry trends. FactSet’s recent performance shows its demand has slowed as its annualized revenue growth of 5.6% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
FactSet’s unimpressive 8.8% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
FactSet isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 12.3× forward P/E (or $225.25 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at one of our all-time favorite software stocks.
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