Factset is a global group. Most of its sales are generated in the Americas (65%). The Europe, Middle East and Africa region accounts for 25%, while Asia remains in the minority with 10%. Factset's client base is dominated by institutional asset management (50% of revenues), with solutions for portfolio management, order execution and performance and risk analysis. For investment banks (19%), Factset provides tools for market analysis, customer relationship management (CRM) and research publication. The offering for asset managers and private banks (15%) aims to optimize advice and customer engagement. Finally, Factset provides data, APIs and securities identification services to financial technology providers and regulators.
FactSet generates its revenues through subscriptions, a common model in the software industry, which ensures good visibility on future growth. This stability is based in part on the loyalty of its customers, who generally stay with the same supplier because of the high costs involved in switching. Alongside S&P Global and Thomson Reuters, FactSet is one of the most comprehensive listed suppliers on the market. As a result, the Group enjoys a strong position, with a customer retention rate of 91% last year.
Smooth, sustainable quarterly growth (source: MarketScreener)
In the field of AI (an area now indispensable to any technology company), Factset is up to speed, even if it took a while to get going. In December 2023, the group launched Factset Mercury, an AI agent designed to optimize the search for junior bankers. Further advances in this area mean that Factset is a winner from the advances in artificial intelligence.
Factset is a company with remarkable growth, as we saw above. Over the 2015-2024 cycle, revenues increased 2.2 times. Margins are high. And the next few years should see a further improvement in this metric. Free cash flow easily exceeds book profits (net income): depreciation, amortization and growth investments are very moderate. This cash is channelled into investment (around 70%) through acquisitions (40%), R&D (24%) and Capex (6%). The remainder is distributed to shareholders in the form of share buy-backs (17%) and dividends (12%).
Free cash flow conversion ratio
On the balance sheet, debt is well under control. Net debt is covered by just over one year's EBITDA.
The future looks promising. The next few years should mark a continuation of Factset's past performance. As we said, growth is smooth and sustainable. The company is paying just under 30 times earnings this year. The discount to S&P Global (close to 40 times earnings) is explained by size (Factset is 6 times smaller) and by S&P Global's greater diversification, with a presence in credit ratings, index provision and a greater grip on data.
Maintaining a valuation assumption of 29 times earnings for the next few years - which seems consistent with the EPS trajectory expected by analysts - Factset could be a good opportunity to play the medium/long term.
