FactSet ASV Growth Accelerates, Bull Case Strengthens

FactSet Research Systems reported a quarterly acceleration in annual subscription value, a key measure of its recurring revenue business. The growth rate picked up from the prior period, the company said in its earnings release.

The acceleration strengthens the argument for a buy rating on the stock. A Seeking Alpha contributor who rated FactSet a buy said the stock was too cheap relative to its growth profile. The contributor has no position in the stock.

FactSet's ASV tracks the annualized value of subscription contracts on the books. A faster growth rate points to stronger demand for its data and analytics from asset managers and investment banks. The metric had been decelerating in earlier quarters, raising questions about market share against Bloomberg and MSCI. The latest quarter's reversal suggests those fears may be overblown. The analyst noted that FactSet's focus on wealth management and corporate clients is paying off.

The valuation stays reasonable. FactSet trades at roughly 25 times forward earnings, below its five-year average of 28 times. If ASV growth keeps accelerating, the multiple could expand, the analyst argued.

Risks include a slowdown in financial services that would cut demand for data subscriptions. Competition from Bloomberg's terminal and MSCI's analytics could pressure pricing. FactSet's debt load is manageable but limits room for aggressive investment.

The next catalyst is the fiscal fourth-quarter earnings report, due in September. Investors will watch ASV growth and guidance. The analyst's buy rating rests on the ASV acceleration and the valuation discount.