FactSet Research Systems Shares Slide 39.6% Is the Market Mispricing Its AI Expansion?

• If you are wondering whether FactSet Research Systems is a bargain or a value trap at around $288 a share, you are not alone. This breakdown is designed to give you a clear answer without the usual jargon.
• The stock has bounced about 8.1% over the last month after a weak patch. However, with shares still down roughly 39.6% over the past year, the market clearly has mixed feelings about its long term potential and risk.
• Recent headlines have focused on FactSet expanding its analytics and data solutions to deepen its footprint with institutional investors, alongside ongoing investments in AI driven tools that aim to make its platform stickier for clients. At the same time, investors are weighing these strategic moves against a tougher backdrop for financial markets data spending. This helps explain the sharp rerating in the share price.
• On our framework, FactSet scores a 3 out of 6 valuation checks for being undervalued. Next, we will walk through what each method is really saying and then finish with a more intuitive way to think about what the stock is worth.

Find out why FactSet Research Systems's -39.6% return over the last year is lagging behind its peers.

Approach 1: FactSet Research Systems Excess Returns Analysis

The Excess Returns model looks at how much profit FactSet Research Systems can generate above the basic return that shareholders require on their equity, then capitalizes those “excess” profits into an intrinsic value per share.

For FactSet, the starting point is a Book Value of $57.95 per share and a Stable Book Value of $67.04 per share, based on weighted future estimates from 6 analysts. The company is expected to earn Stable EPS of $19.28 per share, supported by an average Return on Equity of 28.75, which is comfortably above the implied Cost of Equity of $5.67 per share. That gap translates into an Excess Return of $13.61 per share, suggesting FactSet can continue to create value on each dollar of equity invested.

When these excess returns are projected forward and discounted, the model arrives at an intrinsic value that is around 12.4% above the current share price, implying the stock is modestly undervalued on this basis.

Result: UNDERVALUED

Our Excess Returns analysis suggests FactSet Research Systems is undervalued by 12.4%. Track this in your watchlist or portfolio, or discover 917 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for FactSet Research Systems.

Approach 2: FactSet Research Systems Price vs Earnings

For a consistently profitable business like FactSet Research Systems, the price to earnings (PE) ratio is a useful way to gauge what investors are willing to pay for each dollar of current earnings. In general, faster growth and lower perceived risk justify a higher PE multiple, while slower growth or higher uncertainty should pull a normal or fair PE down.

FactSet currently trades on a PE of around 18x, which is well below both the broader Capital Markets industry average of about 25.3x and the peer group average of roughly 28.9x. Simply Wall St also calculates a Fair Ratio of 14.1x for FactSet. This proprietary metric estimates what the PE should be after adjusting for the company s specific earnings growth outlook, profitability, risk profile, industry, and market cap.

Because the Fair Ratio incorporates these fundamentals rather than relying only on simple comparisons with peers or sector averages, it is a more tailored yardstick for valuation. With the current 18x PE sitting meaningfully above the 14.1x Fair Ratio, the shares look somewhat expensive on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your FactSet Research Systems Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to attach a clear story to your numbers by linking your view of FactSet Research Systems future revenue, earnings and margins to a concrete forecast and Fair Value, then comparing that Fair Value to today s share price to decide whether it looks like a buy or a sell. All of this is available within an easy to use tool on Simply Wall St s Community page that updates dynamically as new earnings or news arrive. For example, one investor s optimistic Narrative might focus on AI driven product integration, margin expansion toward about 27 and a Fair Value closer to the higher analyst target of around $500. A more cautious investor might emphasize rising technology costs, competitive pressure and structurally lower margins, leading to a Fair Value nearer the low end around the mid $300s, with both perspectives expressed transparently through their assumptions rather than hidden in a single PE multiple.

Do you think there's more to the story for FactSet Research Systems? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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