Jimmy Investor
Former Equity Analyst
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 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
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 is undervalued by a lot, trading near 23x earnings and 20x forward versus a historical 30+, especially for a business of its quality. Mastercard may be fairly valued or slightly below, though it is the best business in the world with the least risk. This answers @Greg_GL_87, who argued both still trade near 30x earnings. x.comÂ
The market is wrong to reprice Moody's and S&P Global just because yields are rising. Per @moats_multiples' notes from a TCI call, Chris Hohn is very confident about ratings-agency growth, with investment-grade ratings supported by the AI buildout and sub-investment-grade by huge maturity walls. TCI's large positions in both fit that view. 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
S&P Global may be boring, but it has one of the more interesting setups: after falling about 20% year to date, it trades at about 22x forward earnings versus a five-year average of about 29x. Nine tracked fund managers bought or added to it. 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'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's stock price has recently disconnected from its business fundamentals, the kind of dislocation that makes a stock worth buying. x.comÂ