Finance Jack
Equity Research
S&P Global's ratings and indices could form an exceptionally profitable, wide-moat standalone business. Without its other units, their implied operating margin would be around 68%, among the market's top five; that makes further spinoffs sensible, though the separation is hypothetical. x.com x.comÂ
S&P Global's ratings and indices are some of the greatest business models of all time, so separating other data businesses could improve the company's quality. Its strategic review of Capital IQ and other data businesses could lead to a spinoff. Management says those businesses are strong but may unlock more value separately. x.comÂ
S&P Global looks very bullish after TCI's Chris Hohn expressed strong confidence in growth at the ratings agencies. Per the call notes, investment-grade ratings are supported by the AI buildout, sub-investment-grade by huge maturity walls, and Hohn believes the market is wrong to reprice these businesses lower as yields rise. x.comÂ
S&P Global's July 1 spin-off of Mobility Global refocuses it on its high-margin ratings and indices businesses, removing a conglomerate discount. Its ratings duopoly with Moody's and S&P 500 licensing fees collect tolls on capital markets as passive assets grow and AI and energy buildouts drive a debt issuance boom. Per JPMorgan and other banks, LLMs need proprietary data like its Market Intelligence and Platts benchmarks, reversing AI fears. Q1 operating margin rose 100 bps to 51.8%. x.comÂ
S&P Global's moat may be weaker than its ratings pricing power suggests, and its gross profit dollars are likely to come under pressure as AI does more of the work, even if margins rise. FICO and the credit bureaus once looked just as required and oligopolistic until Vantage, with regulatory help, built a better product and upended pricing. The market is skeptical of historical data resale, as with CoStar and Verisk; the index business looks durable. x.comÂ
S&P Global looks like a strong, fairly low-risk stock likely to beat the market from here, as it trades at 20x forward earnings, among its lowest levels in a decade, despite one of the world's strongest moats. With Moody's it forms one of the best duopolies anywhere, yet it has been lumped into the SaaS selloff. x.comÂ
S&P Global is a quiet compounder that keeps delivering in the background. Its latest earnings were really strong, with revenue and net income both up double digits while spending stayed low, and margins remain excellent as the business scales efficiently despite continued investment. x.comÂ
Moody's and S&P Global could de-rate from high starting multiples if generalist portfolio managers come to see them as FICO 2.0. Their industry structures differ, but parallels in standards, pricing power and regulatory exposure could build a narrative that their pricing power is tapped out after the FICO case study, compressing multiples further. So far their de-rating has come from macro and AI pressure, not such fears. x.com x.com x.comÂ
S&P Global's valuation compression while fundamentals still look good is a gift from the market, because it owns two of the strongest businesses in the world. x.comÂ
S&P Global and Moody's look pretty cheap for a duopoly growing 10-11% a year, trading at 20-25 times earnings, with S&P Global the cheaper of the two. x.comÂ
S&P Global and Morningstar are lumped in with financials and could easily fall another 15-20% by the time Bloomberg declares a recession, so owning them would mainly add cyclical beta. x.comÂ
Moody's is one of the world's most beautiful businesses because trusted ratings take decades to establish, protecting its duopoly with S&P and its pricing power. Operating margins exceed 45%, and Moody's Analytics subscriptions make revenue quite resilient when companies issue less debt. Decades of credit-risk data are a huge AI product opportunity; fast-growing private credit also needs ratings. x.comÂ
