Market Overview

Is Finance Past its Golden-Age?


One of the most popular Finance programs, FactSet, has experienced trouble as of late. The parent company, FactSet Research Systems (NYSE: FDS), recently announced that its subscribers have started to pull away.

Although the company announced positive Q1 earnings along with upbeat Q2 guidance, traders started to push the stock down on fears that the company will not be able to sustain growth in the future. All this activity begs the question: is finance itself starting to slow down?

FactSet, like Bloomberg and Thompson Reuters (NYSE: TRI), serve as auxiliary software providers for financial professionals. Traders, bankers, and others in financial services rely on these programs to give them the most up-to-date news as well as other information, every single day. If FactSet is experiencing slower subscriber growth, does that mean that finance itself is starting to slow down? Is the lower amount of financial professionals directly causing a slowdown in FactSet's business?

However, all hope may not be lost for the company. FactSet is rapidly expanding international operations, and as financial services grows throughout Asia and the Middle East, FactSet may be able to develop new client relationships there. This could help offset the decline in US clients.

Another thing that investors should keep in mind is that financial services is typically cyclical. While the economy is uncertain right now, things may be better in the next several years. If so, financial services is likely to prosper again and FactSet's client subscriptions will most likely rise.

Investors need to realize that FactSet was still able to beat EPS estimates and deliver profitability to its shareholders. Subscriptions are simply a metric to identify the likelihood of future growth. If FactSet is able to maintain profitability while subscriptions decline, all the more power to it.

Investors always have to keep up with the news. While FactSet does not directly affect the American economy, it may give us a sense of how the financial services sector is doing. Traders have to keep in mind that any possible news that affects finance will move markets. As such, traders should keep up with real-time news and be able to act quickly when new developments occur.

Posted-In: Earnings News Broad U.S. Equity ETFs Events Economics Markets Movers Trading Ideas Best of Benzinga


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