FactSet Research Systems Inc. provides integrated financial information and analytical applications to the investment and corporate communities in the United States, Europe, and the Asia Pacific. The company delivers insight and information through the workflow solutions of research, analytics and trading, content and technology solutions, and wealth. It serves portfolio managers, investment research professionals, investment bankers, risk and performance analysts, and wealth advisors. FactSet Research Systems Inc. was founded in 1978 and is headquartered in Norwalk, Connecticut.
FactSet vs SP400 vs XLK vs XLF
Since 2015, we've seen tremendous growth in the tech-space, as the world is continuously becoming more and more digitalised, including the space of financial data feeds which FactSet is a part of. While the returns have been slightly below XLK, it is still higher than the SP400 and the XLF, as these serve as a benchmark against FactSet.
FactSets competitors include; S&P Global, Thomson Reuters, Bloomberg. Traditionally Bloomberg & Reuters have been enjoying a duopoly in the space, with exceptionally high fees (>2000$/month*) for the Bloomberg Terminal & Reuters Eikon.
Bloomberg being structured as a private entity, serves as an exception in our analysis, with the below chart illustrating the growth we have seen over the last 5 years for Thomson Reuters, S&P Global and FactSet;
While, S&P global has risen the most, FactSet and Reuters Eikon have both risen spectacularly in comparison with the SP500. FactSet's continued growth is set to gain additional momentum, as FinTech is in the process of disrupting the information asymmetry that has existed between institutional players and ordinary professional investors.
Primarily due to the fact that the price-tag of professional data-feed platforms, such as the Bloomberg Terminal & Reuters Eikon have made high quality institutional data inaccessible to a majority of professional investors outside the institutional space.
We clearly see that the pricing of both Reuters Eikon & Bloomberg Terminal is very steep, whilst Capital IQ and FactSet at almost half-price 12 000 - 13 000$/year.
In terms of market share there exists a duopoly between Reuters & Bloomberg, and an oligopoly amongst all of the data-providers. It is important to note that some of these datafeed-providers, such as Capital IQ sell their data to newer FinTech startups, so revenue streams are diversified and increased.
Among these nascent Fintech startups, most notable ones are Sentieo, Koyfin and theTiKR, whose aim is to provide with institutional grade data to the retail space. Capital iQ is one data provider that supplies with equity data to these startups, with potential for FactSet joining the space and increasing their revenue streams as the amount of users outside of institutional settings grow and the emergence of more platforms to meet the increased demand.
Revenue has been growing at a very yet respectable rate, as seen in the chart below, with further upside based on increased sector growth due to increased market-size.
Bloomberg being structured as a private entity, serves as an exception in our analysis, with the below chart illustrating the growth we have seen over the last 5 years for Thomson Reuters, S&P Global and FactSet;
While, S&P global has risen the most, FactSet and Reuters Eikon have both risen spectacularly in comparison with the SP500. FactSet's continued growth is set to gain additional momentum, as FinTech is in the process of disrupting the information asymmetry that has existed between institutional players and ordinary professional investors.
Primarily due to the fact that the price-tag of professional data-feed platforms, such as the Bloomberg Terminal & Reuters Eikon have made high quality institutional data inaccessible to a majority of professional investors outside the institutional space.
| Platform | Price (per user per year) | Number of users | Market share |
|---|---|---|---|
| Bloomberg | The cost of a Bloomberg Terminal is $24,000 per year. | 325,000 | 33.4% |
| Capital IQ | Capital IQ pricing starts at $13,000 per user per year with a minimum of 3 users and drops to as low as $7,500 per user per year for larger numbers of users. | Undisclosed | 5.6% |
| FactSet | The cost of a FactSet subscription is $12,000 per year for the full product. | 89,000 | 4.2% |
| Eikon | The cost of Thomson Reuters’ Eikon is $22,000 per year. | 190,000 | 23.1% |
We clearly see that the pricing of both Reuters Eikon & Bloomberg Terminal is very steep, whilst Capital IQ and FactSet at almost half-price 12 000 - 13 000$/year.
In terms of market share there exists a duopoly between Reuters & Bloomberg, and an oligopoly amongst all of the data-providers. It is important to note that some of these datafeed-providers, such as Capital IQ sell their data to newer FinTech startups, so revenue streams are diversified and increased.
Among these nascent Fintech startups, most notable ones are Sentieo, Koyfin and theTiKR, whose aim is to provide with institutional grade data to the retail space. Capital iQ is one data provider that supplies with equity data to these startups, with potential for FactSet joining the space and increasing their revenue streams as the amount of users outside of institutional settings grow and the emergence of more platforms to meet the increased demand.
Revenue has been growing at a very yet respectable rate, as seen in the chart below, with further upside based on increased sector growth due to increased market-size.
Factset is currently trading at a P/E of 33.8X.
S&P Global is trading at a P/E of 34.4X.
Thomson Reuters is trading a P/E of 25.2X.
The P/E ratios seem high, but given the growth-opportunities that exist, and that tech in general is valued at high P/E ratios (due to high growth*), we believe that FactSet is a solid BUY, with a target price of 400$ over the next 12 months.