SPGI - Moody's: The Valuation Doesn't Convince Me
2024-04-24 08:25:41 ET
Summary
- Moody's Corporation has experienced a drastic change in revenue mix over the years with Analytics becoming first and Ratings second.
- Moody's Analytics is what's driving the revenue growth, and the company plans to further invest $60 million in 2024 to integrate more generative AI solutions into their risk management offerings.
- MCO stock has outperformed the S&P 500 over the decades and past year. Nonetheless, I find the current valuation expensive, and I would rather give them a hold rating.
Moody's Corporation ( MCO ), has slightly outperformed the S&P 500 over the last year by around 300 basis points. This legacy business currently has a market cap of $69.2 billion, with $5.916 billion in revenue, $1.607 billion in net income, and 15,151 employees in several countries. In this analysis, I went through the company's revenue mix evolution, stock performance, and valuation to come up with a conclusion of a hold rating for the stock.
Moody's Corporation Overview
If you went to business school you probably learned in your initial finance class about credit rating agencies, and that S&P, Moody's, and Fitch are the big-three agencies. Well, at least that was the case for me. While this is completely true, in the case of Moody's, their ratings business (MIS) has slowly gotten surpassed in revenue share by their analytics business ((MA)) that started just in 2007, vs. the rating business that was founded 98 years prior....
Moody's: The Valuation Doesn't Convince Me