Analysts' mean target prices suggest a 6.5% downside for Thomson Reuters and 10.5% downside for FactSet Research Systems Inc. (NYSE:FDS). These estimates reflect the underlying softness of the sector. The combination of cautiousness among retail investors and cost-cutting measures at big firms is not good for selling financial data.
My take here is that this trend will most likely continue. Despite the fact that retail investors are returning to the market, they will likely stay cautious when it comes to purchasing external products. Brokerage houses provide free basic research, and "free" is a powerful competitor. As for financial companies like banks and hedge funds, they have shown no sign of increasing their expenses. Almost every bank has actually announced additional money-saving measures.
In my opinion, all three stocks are overvalued. I do not see where the growth would come from to justify the valuation of these stocks. Thomson Reuters is in a better position with a cheaper valuation and a dividend that yields 3.71%. FactSet and Morningstar, Inc. (NASDAQ:MORN) are bleak from the income perspective, with 1.27% and 0.64% yields, respectively.
The environment suggests growth would be mostly anemic for these companies. As a result, they are likely to perform in line with the S&P 500. This isn't ideal for most investors; after all, you are searching for outperformers, aren't you?
The article A Cautious Outlook for These Investment Data Providers
originally appeared on Fool.com is written by Vladimir Zernov.
Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends FactSet Research Systems (NYSE:FDS) and Morningstar.
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