FACTSET RESEARCH SYSTEMS INC. (FDS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $308.98, FACTSET RESEARCH SYSTEMS INC. (FDS) is priced for +4.0% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-26.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/FDS

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.1% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.9%); the inversion above states its own rate.

Per-Model Detail (n=18)

Solvency

Bullet Takeaways

• Nearly all of FactSet's money arrives as a subscription, and the annual filing is blunt about the term: The majority of client contracts have a duration of one year, so the whole revenue base is renegotiated every twelve months rather than locked away in multi-year commitments.
• The structural risk sits with the customer rather than the product, and the company names it as a risk heading of its own: The continued shift from active to passive investing could negatively impact user count growth and revenues, because passive management needs far fewer analysts per dollar of assets managed.
• The number worth tracking is organic annual subscription value, which grew 7.1% to $2.48 billion in the quarter ended May 31, 2026, since subscription value booked this year is the revenue that shows up next year.

Bull Case

Begin with the disagreement among the methods, because on this name it leans unusually far in the buyer's direction. Peer multiples put the business comfortably above where it trades. The cash-flow methods, which project forward and discount back, also land above the price. Only two frames land under it: the price sits roughly 50% above the asset-value methods and about 57% above the earnings-power methods, both of which measure a company by what it owns or by capitalising what it already earns, with nothing credited for the next contract renewal. For a business running about 30% operating margins on recurring subscription revenue, standing below the peer-multiple read is a strange address.

What holds the subscription in place is not the data. Anyone can buy a price feed. What clients pay for is the aggregation: the company collect[s] and aggregate[s] third-party content from data suppliers, news sources, exchanges, brokers and contributors into our own dedicated managed databases, which clients access to perform their analyses. The work is in the normalising, the identifiers, the history that ties one vendor's ticker to another's. A rival can replicate the feed in a quarter and the reconciliation layer in several years.

Subscription value is growing, and it accelerated. Organic annual subscription value stood at $2,370.9 million, an increase of 5.7% over the prior year at the end of fiscal 2025, rising in every segment with most of the gain in the Americas, and by the quarter reported this July that pace had reached 7.1%. Revenue lags subscription value by roughly a year in a business like this, which makes the acceleration a forward-looking fact rather than a backward-looking one.

Artificial intelligence appears twice in the filings, once as a threat and once as a product. The second appearance is the one the bull leans on: Our AI roadmap, driven by our FactSet AI Blueprint, is resonating with our clients, and FactSet's AI solutions are generating usage, demand and commercial transactions. A vendor sitting on decades of normalised financial content is better placed to sell a language model something useful to read than a language model vendor is placed to build the content.

The capital return is doing real work while all this is argued about. The cover of the most recent quarterly filing counts 35,565,543 shares outstanding as of June 25, 2026, against 37,806,774 a year earlier. That is close to one share in sixteen retired inside twelve months, funded out of operations rather than borrowings, and it happened while the operating profit still covered the interest bill about 13 times over. The bear will say the buyback is what happens when management cannot find growth to buy. The bull's answer is that retiring stock below the peer-multiple read is the highest-return acquisition available to it.

Bear Case

The demand cycle here is not economic, it is structural, and it runs against the company. FactSet's unit of demand is a seat in front of an analyst at an active manager, and the industry has spent two decades moving money to vehicles that employ fewer of them. The company files the concern as its own risk heading: The continued shift from active to passive investing could negatively impact user count growth and revenues. It also names the second-order version, in which surviving clients consolidate their spending with fewer suppliers, by selecting suppliers with lower-cost offerings or by self-sourcing their needs for financial market data. Both pressures compress the same line.

Contract length is where that pressure gets its teeth. The majority of client contracts have a duration of one year, which means there is no multi-year backlog absorbing a bad year of buy-side budgets. Compare that with VRSK, which recognises revenue on agreements running generally one to five years and drew approximately 83% of its 2025 consolidated revenues from hosted subscriptions, per its own annual filing. Both businesses look like recurring revenue from the outside. Only one of them has to win the argument with procurement every single year.

Then the competitive threat, which the filings state without softening. Rivals are building alternative data, analytics platforms and fintech tools, and Many of these competitors also have significant AI capabilities and funding. The risk factor goes further: If our competitors or other third parties incorporate AI technologies, such as emerging generative and agentic AI, into their products and processes more quickly or more successfully than us, this could impair our ability to compete effectively. A workstation is a place where a user goes to assemble an answer. If the answer can be assembled by asking, the workstation is the part of the workflow most exposed.

The cost side is already visible in the results. Diluted earnings per share came in at $3.59 for the second quarter of fiscal 2026, a decrease of 4.5% compared with the prior year period, which the filing attributes to higher operating expenses and an impairment charge within Other assets, partly offset by revenue growth. Headcount rose 3.2% over the prior year, weighted toward the Americas. Growing people faster than profit is a defensible choice while subscription value is accelerating. It is an expensive one if it is not.

None of which requires a collapse to hurt. It only requires the earnings-power frame to become the relevant one. That frame, which capitalises what the business earns today and credits no growth at all, sits about 57% below where the stock changes hands. Should annual subscription value flatten, the buyer is left holding a business valued on a durability assumption rather than on demonstrated earning power, and the two numbers are a long way apart.

Valuation

Today's price does not ask the business to grow. Run the arithmetic backwards from $254.41 a share and roughly 9.2 billion dollars of market value and what falls out is an assumption that operating profit shrinks by about 2.1% a year for the next five years. That is the bet on offer, and it is worth pausing on, because the company's own subscription value grew 7.1% in the quarter reported this July. The market and the company are describing different futures.

The methods split cleanly on which of those futures they encode. Peer multiples land well above the price, and so do the discounted cash-flow approaches, which is the pattern of a business the market has re-rated downward rather than one whose fundamentals have broken. Below the price sit the two frames that credit nothing forward: the asset-value methods, which the price exceeds by roughly 50%, and the earnings-power methods, which it exceeds by about 57%. A reader can hold both facts at once. Priced against what peers fetch, this looks inexpensive; priced against what it earns with no future credited, it does not.

What has to be true is therefore narrower than usual. The buyer is not underwriting expansion. The buyer is underwriting that the subscription base holds its shape, that renewal season does not turn into repricing season, and that the roughly 30% operating margin survives the headcount the company is adding. Every point of subscription growth above flat is upside against the embedded assumption. The exposure is that the assumption already tolerates mild decline, which tells you the market has a specific fear rather than a vague one, and the 10-K names that fear on its own risk page.

Cohort position is where the discount starts to look deliberate rather than accidental. VRSK, the closest listed analogue in the block, books revenue on agreements running generally one to five years, with approximately 83% of 2025 consolidated revenues from hosted subscriptions. FactSet's book renews annually. Two businesses with similar-looking recurring revenue and materially different contractual grip should not carry the same multiple, and the market appears to have noticed.

The balance sheet neither rescues nor threatens the case. Borrowings run to about 1.39 billion dollars against roughly 304 million dollars of liquid assets. Interest is the more useful read. The bill disclosed for the three months ended February 28, 2026 came to 13.0 million dollars, comfortably inside a single quarter of operating profit, and across the trailing year operating profit covers it about 13 times over. That coverage, rather than any leverage ratio, is the right measure for a subscription business with predictable collections. Meanwhile the shares outstanding on the latest quarterly cover page, 35,565,543, are down from 37,806,774 a year earlier, which is capital return showing up in the one place it cannot be dressed up. The company is buying its own stock at a price the peer-multiple frame calls cheap and the earnings-power frame calls dear. Which of those is right is the entire question, and it will be answered by renewal rates rather than by arithmetic.

Catalysts

Third-quarter fiscal 2026 results landed on July 1, 2026, covering the quarter ended May 31. Revenue came in at $622.92 million against a Q3 FY2026 revenue consensus of $618.09 million, and organic annual subscription value grew 7.1% to $2.48 billion. Subscription value is the number to weigh, because it books this year and shows up in reported revenue over the following one.

Sell-side opinion is unusually scattered, which is itself information. UBS cut its target to $340 from $380 while keeping a buy rating; Barclays lifted its target to $216 from $210 and stayed underweight. The mean of the published targets, $255.06, sits within a percent of where the stock trades. That mean is not a forecast of agreement. It is the midpoint of a genuine argument about whether generative tools expand this company's addressable work or replace it, and the average simply happens to land where the market already is.

The fiscal year closes on August 31, which makes the fourth-quarter report and the initial fiscal 2027 outlook the next scheduled event of consequence. The company flags in its own risk factors that performance may not be sufficient to meet financial guidance or publicly disclosed long-term targets, and after a second quarter in which diluted earnings per share fell 4.5% on higher operating expenses and an impairment charge, the expense line will get as much attention as the subscription line.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• VRSK (Verisk Analytics, Inc.)
• FY2025 10-K: …business in 2016 and our specialized markets business in 2022, a net gain on the early extinguishment of debt in the prior year, the amortization of deferred issuance costs and original issuance discounts and redemption premium accrual in 2025 associated with the termination of the 2030 Senior Notes, 2036 Senior…
• FY2025 10-K: 022, partially offset by the impact of foreign currencies. Interest Expense, net Interest expense was $124.6 million for the year ended December 31, 2024 compared to $115.5 million for the year ended December 31, 2023 , an increase of $9.1 million or 7.9%. The increase in interest expense was primarily related to the…
• NIQ (NIQ Global Intelligence plc)
• FY2025 10-K: …model, global presence and enhanced technology platform allow us to scale solutions rapidly, lower our cost to serve clients and grow revenue at increasing margins. We believe that our strategic focus on cost optimization and efficiency will continue to expand our margins. Our embedded AI capabilities and expansion…
• FY2025 10-K: …some of our competitors may enter into new partnerships with each other or may establish or strengthen cooperative relationships with agency partners, technology and application providers in complementary categories, or other parties. Competitors may also consolidate with existing service providers or strategic…
• CLVT (CLARIVATE PLC)
• FY2025 10-K: …The markets for our products and services are highly competitive and are subject to rapid technological changes and evolving customer demands and needs. We compete on the basis of various factors, including the quality of content embedded in our databases, customers' perception of our products relative to the value…
• FY2025 10-K: …functions. Significant segment expenses include people-related costs, royalties and other product costs, technology costs (comprised primarily of software licenses and hosting costs), and outside service costs (comprised primarily of professional services and contracted labor). Other costs primarily include…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.