Avoid These 2 Fintech Stocks Wall Street Believes are Expensive

NYSE: FDS | FactSet Research Systems Inc.  News, Ratings, and Charts

FDS – Even though the fintech market is expected to boom over the long run due to the rapid adoption of advanced technological solutions in the financial sector, data privacy concerns continue to worry consumers. Against this backdrop, we think it could be wise to avoid fintech stocks FactSet Research (FDS) and Lemonade (LMND). They look overvalued at the current price levels, and Wall Street analysts expect them to decline significantly in the near term. Read on.

The Fintech industry has immense growth potential over the long term due to the increasing adoption of advanced technologies for digital transactions. According to The Express Wire report, the Fintech market is expected to grow at an 8.6% CAGR over the next three years.

However, concerns related to data security have been dampening the industry’s growth. With increasing cyberattacks, consumers are wary of using fintech solutions, especially since they typically involve confidential information. Investors’ pessimism toward fintech stocks is evident in Global X FinTech ETF’s (FINX) 2.5% loss over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) 3.9% returns.

So, even though the long-term prospects for the fintech industry look promising, some fundamentally weak companies that are trading at lofty valuations could witness a price pullback in the near term. Wall Street analysts expect FactSet Research Systems Inc. (FDS) and Lemonade, Inc. (LMND) to continue declining in the near term. So, these two stocks are best avoided now.

FactSet Research Systems Inc. (FDS)

FDS in Norwalk, Conn., provides integrated financial information and analytical applications to deliver insight and information through the workflow solutions of research, analytics and trading, content and technology solutions, and wealth. It serves a range of financial professionals, including portfolio managers, investment bankers, wealth advisors, and corporate clients.

FDS’ adjusted operating income decreased 5.2% year-over-year to $126.46 million in its fiscal third quarter, ended May 31, 2021. Its free cash flow decreased 13.1% year-over-year to $121.66 million. Its adjusted net income came in at $104.81 million, which represents a 4.8% year-over-year decrease. The company’s adjusted EPS was  $2.72, down 4.9% year-over-year.

In terms of forward P/B, FDS’ 12.21x is 990% higher than the industry average of 1.12x. In terms of forward non-GAAP PEGl, the stock’s 4.34x is 349.4% higher than the 0.97x industry average.

Analysts expect FDS’ EPS to come in at $2.73 for the current quarter, ending August 31, 2021, representing a 5.2% year-over-year decrease. The stock has lost 4.3% over the past year to close yesterday’s trading session at $339.93. Wall Street analysts expect the stock to hit $321.33 in the near term, indicating a potential 5.5% decline.

FDS’ weak fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. It has a D grade for Growth.

Click here to see FDS’ ratings for Sentiment, Quality, Value, Stability, and Momentum as well. FSD is ranked #28 of 102 stocks in the D-rated Financial Services (Enterprise) industry.

Lemonade, Inc. (LMND)

LMND provides various insurance products in the United States and Europe, covering stolen or damaged property and personal liability. The company also offers renters, homeowners, and pet insurance, life insurance products, and landlord insurance policies.

The company’s revenue decreased 10.3% year-over-year to $23.50 million for the first quarter, ended March 31, 2021. Its gross profit decreased 58.7% year-over-year to $1.90 million, while its net loss increased 34.2% year-over-year to $49 million. Also, its total liabilities came in at $333.80 million, up 16% year-over-year.

In terms of forward EV/S, LMND’s 34.84x is significantly higher than the 2.88x industry average.

LMND’s EPS is expected to decrease 56.1% for the quarter ending September 30, 2021 and remain negative in its fiscal years 2021 and 2022. The company’s revenue is expected to decline 10.4% year-over-year to $26.80 million for the quarter ended June 30, 2021. Over the past six months, the stock has retreated  40.4% to close yesterday’s trading session at $86.59. In addition, Wall Street analysts expect the stock to hit $65.80 in the near term, indicating a potential 24% decline.

LMND’s poor prospects are apparent in its POWR Ratings also. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system.

It has an F grade for Value and Sentiment, and a D grade for Growth, Momentum, Stability, and Quality. Click here to see all the POWR ratings for LMND. It is ranked last of 56 stocks in the Insurance – Property & Casualty industry.


FDS shares were trading at $341.84 per share on Wednesday afternoon, up $1.91 (+0.56%). Year-to-date, FDS has gained 3.33%, versus a 16.81% rise in the benchmark S&P 500 index during the same period.


About the Author: Nimesh Jaiswal


Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
FDSGet RatingGet RatingGet Rating
LMNDGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Inflation Not Fading Fast Enough for Stock Investors

Investors may have celebrated the end of high inflation too soon. The CPI report shows inflation bouncing higher and thus pushing back the start date for Fed rate cuts. This has the S&P 500 (SPY) coming off recent highs. This begs questions like how much more downside could we see? And when will the bull market get back on track? 44 year investment veteran Steve Reitmeister shares his answers to these questions in this timely commentary including a preview of his top picks to stay ahead of the pack. Read on below for more...

Software Stock Watchlist - Should You Buy, Sell, or Hold?

Rapid growth in the software sector is fueled by increasing digitalization, growing cloud adoption, integration of AI and ML capabilities into software products, and rising cyber threats. So, let’s analyze whether you should buy, hold, or sell software stocks The Sage Group (SGPYY), Qualys (QLYS), and Blackbaud (BLKB). Read more to find out...

Bank of America (BAC) Braces for Earnings - Strategies for Investors

Bank of America (BAC), the second-largest U.S. lender, will publish its first-quarter earnings on April 16. With the bank’s net interest income expected to decline in the first quarter, should investors consider investing in the stock ahead of its earnings? Read on to learn my view...

4 Bullish Airliner Stocks to Consider - Buy or Watch?

The airline industry is well-poised for continued growth thanks to surging passenger and air cargo demand amid rapid urbanization, globalization, and economic expansion. So, should you buy or watch airline stocks SkyWest (SKYW), International Consolidated Airlines (ICAGY), Controladora Vuela (VLRS), and Air Canada (ACDVF)? Read on…

Updated 2024 Stock Market Outlook

The bull market continues to rage on with the S&P 500 (SPY) making new highs. That is the past...the question is what does the future hold? That is why 44 year investment veteran Steve Reitmeister provides this updated 2024 Stock Market Outlook to help you carve a path to outperformance the rest of the year. Read on below for the full story...

Read More Stories

More FactSet Research Systems Inc. (FDS) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All FDS News