SPGI - S&P Global: Powering Global Markets At A Discount To Peers

2024-02-07 00:28:37 ET

Summary

• S&P Global is a diversified financial services company offering a variety of industry-leading products including the market intelligence platform Capital IQ, its credit ratings and stock indices such as the S&P 500.
• Since 2015, margins have expanded by ~1000bps vs. peers at around half of that, enabling SPGI to deliver industry-leading returns on capital.
• At ~50% of ratings market share, SPGI is poised to benefit from the resurgence in credit with YoY indicators turning positive and ~$12tn of US corporate debt maturing through 2028.
• SPGI is also actively investing in new and emerging megatrends, achieving 44% and 10% growth from Q1 '22 to Q3 '23 in ESG and Indexing, ahead of key competitor MSCI.
• Given a ~30% discount to peer-implied FY25 P/E and ~33% PEG discount to pure-play peers such as MSCI and Moody's, I see SPGI as severely mispriced and initiate at Buy with a price target of $541 (+20% upside).

Company Overview

S&P Global Inc. ( SPGI ) is a diversified financial services company currently operating across 5 segments, each recognized as a global leader in its respective field. [All information from SPGI Investor Factbook ]

Market Intelligence Through the Market Intelligence segment, S&P provides data and risk analytics for customers including investment banks, asset managers and large corporates. Flagship product is the Capital IQ desktop and mobile platform which offers access to financial and non-financial data for publicly traded and private companies as well as detailed information on national economies such as yield curves and economic statistics for ~325k monthly users. Operating mainly subscription based, the segment has highly stable revenues with 95% of sales recurring. S&P's main competitors in the segment include the Bloomberg terminal, FactSet ( FDS ) and Refinitiv's Eikon....

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