Investing In FactSet? Goldman Still Doesn't Like It After Latest Analysis

Goldman Sachs’ Andre Benjamin reiterated a Sell rating on FactSet Research Systems Inc. FDS, with a price target of $130.

Capital Market Exposure

Benjamin mentioned that investor concern regarding companies that participate in the capital markets has been rising, and FactSet Research is among the most exposed stocks, with 100 percent of its revenue coming from banks and asset managers.

An analysis of the company’s end markets and market share suggests that growth was likely to decelerate in 2016 and that the estimate were likely to be revised down.

Downside Risk

Benjamin believes that the stock could witness 13 percent downside, with multiple compression and downward revision of expectations driving a pullback.

“We see downside risk to our below-Street estimates, given we already assume FDS will grow the fastest of the financial desktop companies as it takes share from Bloomberg and smaller competitors as customers look to consolidate and save costs,” the analyst elaborated.

Benjamin also believes that the stock’s premium multiple gives “too much credit” for FactSet Research’s low leverage and almost 100 percent of the company’s revenue coming from subscriptions.

“The Goldman Sachs Financials team expects revenue for many of the largest US traditional asset managers, equity and debt underwriters, and sales and trading businesses to be down. Most of the large Sell-side banks are restructuring or have cost cutting programs in place,” the analyst added.