FactSet
In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) presents FactSet, which provides financial data, news and analytics for the financial community.
Introduction
FactSet also known as FactSet Research Systems Inc. is a leading provider of financial data and analytics solutions, catering to professionals in the investment industry. Whether you are a financial analyst, portfolio manager, or student of finance, FactSet offers powerful tools and resources to analyze markets, evaluate companies, and make informed investment decisions.
Logo of Factset
Source: Factset
History
Founded in 1978 by Howard Wille and Charles Snyder, FactSet began as a startup aiming to revolutionize financial data analysis. The company initially focused on providing financial analysis software for investment professionals, aiming to streamline data processing and analysis in the rapidly evolving financial industry.
Throughout the 1980s and 1990s, FactSet expanded its product offerings and market presence, catering to a growing demand for sophisticated financial data and analytics solutions. In its journey of growth and expansion, FactSet has made several strategic acquisitions to enhance its product portfolio and expand its market reach.
In 2007, FactSet acquired Market Metrics, a provider of market research and consulting services for asset managers. In 2015, FactSet acquired Portware LLC, a leading provider of multi-asset trade automation solutions for asset managers and institutional traders. In 2020, FactSet acquired Truvalue Labs, a pioneer in AI-driven environmental, social, and governance (ESG) data and analytics.
From its humble beginnings in the late 1970s to its current status as a global leader in financial data and analytics, FactSet has continually evolved to meet the evolving needs of the investment community.
Key Components of FactSet Research Systems
Earnings Estimates
Earnings estimates refer to predictions made by financial analysts and experts regarding how much profit a company is expected to generate in the future.FactSet gathers and provides these estimates, which are crucial for investors and analysts to assess a company’s potential performance.
According to Factset, 2024, the company’s consensus estimates are aggregated from a wide base of contributors and cover 19,000+ active companies across 90+ countries.
Revenue Projections
Revenue projections indicate how much revenue a company is expected to generate over a specific period. FactSet’s revenue projections are based on industry trends, market conditions, and company-specific factors, providing users with valuable insights into sales performance and revenue drivers.
For example, in June 2024, Factset released an expected revenue projection for S&P 500 companies stating “The blended (companies that reported and the estimation of the companies yet to report)earnings growth rate for the S&P 500 for Q4 2023 is 3.2%. It should be noted that analysts are currently projecting (year-over-year) revenue growth for all four quarters of 2024. For Q1 2024 through Q4 2024, the current estimates for revenue growth are 3.5%, 4.6%, 5.0%, and 5.7%, respectively.”. This helps stakeholders of the respective industry to analyze, project, and invest accordingly.
Forecasts for Key Financial Metrics
In addition to earnings estimates, FactSet offers forecasts for key financial metrics such as revenue growth rates, cash flow projections, and profit margins. These forecasts provide insights into overall financial health and performance metrics, helping users assess business strategies, identify growth opportunities, and make informed investment decisions. By analyzing financial forecasts, users can anticipate market trends and evaluate the potential impact on investment portfolios.
Coverage
FactSet covers a wide range of companies across different industries, from large corporations to smaller businesses. This extensive coverage ensures that users have access to comprehensive financial data and insights.
FactSet provides access to 200+ data items, including 100+ metrics across 18 industries encompassing airlines, banking, insurance, oil/gas, and retail. It leverages estimates that are collected directly from the research reports and flat file feeds of 800+ contributors across 55 countries.
Period
Factset has evolved since its introduction in 1978 and in 2023, Factset has expanded its client base to over 7,900 and increased its user base by 6%, surpassing 189,000 users. Factset with over 45 years of history, facilitates top-down analysis to better assess potential growth and risk as well as future value across industry, sector, index, country, and region.
Frequency
The period and frequency of forecasts on Factset vary based on user needs and market dynamics. FactSet incorporates quarterly and annual financial reports from companies, including earnings releases, revenue figures, balance sheets, and cash flow statements. Users can access real-time updates and forecasts based on two categories that are data frequency and update frequency, where they provide quarterly data frequency and an intraday update frequency.
FactSet also includes on a timely basis event-driven updates such as corporate actions (e.g., mergers, acquisitions, dividends) and regulatory filings (e.g., SEC filings), providing comprehensive coverage of market events impacting investment decisions.
Firms and Financial analysts
According to James Chen (2023à, FactSet is broken down into three business units: one in the United States, one in Europe, and one in Asia-Pacific. The business unit located in the United States provides financial solutions to financial professionals as well as domestic financial institutions. The European and Asia-Pacific business units only service financial professionals in the regions in which each unit operates.
As of 2023, FactSet services over 200,000 users in more than 8,000 companies and organizations. FactSet has 37 offices in 20 countries. The company reports it has had a client retention rate of 95% with 43 years of revenue growth.
Pricing
FactSet’s pricing model varies based on subscription plans and user requirements. Students can explore different pricing tiers to access specific data sets, analytical tools, and premium features tailored to their academic or research needs. Understanding FactSet’s pricing structure is essential for management students evaluating the cost-benefit of utilizing its services for financial analysis and research purposes.
FactSet provides its services for a lower price than some of its competitors because the company uses multiple sources to provide its data, which creates pricing competition between suppliers.
Use of FactSet by the Financial Community
Benchmark for Analysis
FactSet serves as a benchmark for financial analysis, offering a comprehensive suite of tools for analyzing companies, industries, and markets. Management students can use FactSet to perform detailed financial modeling, comparative analysis, and valuation assessments, gaining practical experience in fundamental analysis techniques.
Market Expectations
FactSet provides access to economic data and forecasts that shape market expectations. Users can track indicators such as GDP growth, inflation rates, unemployment figures, and interest rate projections to anticipate broader economic trends.
Earnings Season Preparation
During earnings seasons, by leveraging FactSet’s capabilities, users can navigate earnings announcements with confidence, interpret financial results effectively, and make well-informed investment decisions based on fundamental analysis and market intelligence.
FactSet and Tests of Market Efficiency
Academic works
Academic researchers use FactSet’s extensive database and analytical tools to conduct empirical studies on various topics in finance, economics, and investment management. FactSet’s rich dataset allows researchers to analyze market behavior, asset pricing models, and the impact of economic indicators on financial markets. Researchers use FactSet to assess whether asset prices reflect all available information, conducting event studies and anomaly detection to identify market inefficiencies.
Information Dissemination
Information dissemination refers to the process of distributing financial data, market insights, and analytical reports to users within the investment community using FactSet’s platform. FactSet provides real-time market data on stock prices, indices, commodities, currencies, and other financial instruments. Users can access live updates and monitor market movements as they occur, enabling timely decision-making and risk management.
FactSet disseminates earnings releases, corporate news, and press releases from companies within its coverage universe. Users receive alerts and notifications about important announcements, enabling them to stay informed about company developments and assess potential market impacts.
Pros and Cons
Given its history and operations in so many industries and markets, we certainly need to know the pros and cons of the FactSet.
FactSet provides researchers with access to extensive financial data and analytics, and comprehensive financial data coverage across global markets. FactSet provides a user-friendly interface and intuitive features. It has very well-known powerful tools for financial analysis and investment research.
On the other side, FactSet subscription costs may limit access to users with limited budgets or in academic institutions with constrained resources. The complexity of mastering advanced functionalities may also present a learning curve for users new to the platform.
Conclusion
FactSet impact extends across the financial community, serving as a trusted resource for investors, traders, analysts, and corporate professionals worldwide.
Why should I be interested in this post?
As a management master’s student focusing on finance or strategic analysis, understanding and utilizing financial data platforms like FactSet can greatly enhance your skills and career prospects.
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Useful resources
Wikipedia FactSet
FactSet FactSet Estimates – Consensus
FactSet FactSet Annual Report 2023FactSet Earnings Insight
About the author
The article was written in May 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).
