Research and analysis are vital aspects for financial institutions and investors. For S&P Global and Moody’s Corp, this is a field they have invested in. The former operates on four segments, each with a different specialization, while the latter has two areas. Despite the differences in the number of segments, their operations are similar, but the size of their operations are different. Therefore, this paper will critically analyze these companies to deduce the differences and similarities between them. In the end, they contribute to the investor’s decision by distinguishing the level of quality for different investment institutions with investments potential.
In developing this comparison between the two institutions, valuation is one of the critical standards to apply. Looking at the asset base in these companies, the shares at S&P have not shifted to their favor amid the gained traction by high beta over the last half. However, some analyses find the company’s position favorable (Lewis, 2021). The rating is impressive, and the market expectations are down to a point where the safety margin exceeds other periods. However, the acquisition of IHS is expected to increase the valuation of S&P. The recent acquisition is anticipated to increase the rate of growth, increase profits and increase the price of its share to $18 after full integration is achieved (Lewis, 2021). These occurrences are expected amid the decline in CFROI, which has declined from 54% to 30% (Lewis, 2021). The decline has no negative effect on the valuation because the CFROI decline from the holding model is an attractive upside. An attractive upside occurs when the CFROI is estimated to be higher than market participants’ ratings, which is the case for S&P. Moody’s corp has also been in the acquisition process as it has acquired PassFort. The company has also agreed to acquire Kompany. These acquisitions improve analytical capabilities, data, and overall service delivery (Moody’s Corp, 2021). Therefore, the company’s valuation is likely to increase amid profits that are greater than its revenue growth.
The valuation of Moody’s corp is expected to grow to 84.6 billion (Macroaxis LLC, 2022). Despite such growth, the valuation indicates that free cash flow value is expected to decline to 1.7 billion (Macroaxis LLC, 2022). However, it is ranked fifth among related companies in its dividends payment. Its real value per share is 380.17 $, which appears to be undervalued (Macroaxis LLC, 2022). Although its dividend yield will increase, the value of its payment of dividends and other cash distributions will suffer negative outcomes. The last reported payment of dividends and cash distributions was 463 million, while in 2022, it stands at -499.6 million (Macroaxis LLC, 2022). The dividends per basic common share from the last report have declined to 2.18 from 2.48 (Macroaxis LLC, 2022). For S& P, the payout ratio for its dividends was 24.62 %, and an annual dividend yield of 0.85 (Yahoo finance, 2022). At the moment, such figures are not significantly different compared to those of Moody’s corp because they stand at 0.37, which is a considerable margin (Macroaxis LLC, 2022). Moody’s corp undervalued stocks are lower than those of S&P. They are lower because the latter’s stand at 96 while that of Moody’s corp is 94 (Ticker on, 2022). However, it has a higher price growth rating of 60 compared to 57 for S&P (Ticker on, 2022). Although, Moody’s corp is less overvalued than S & P. Looking at the overvalued assets, the price-earnings ratio is similar. The main difference is seen in the distinct growth of S & P.
Based on the valued stock in the past financial year. The two companies are in the same range. The companies have the same ranges when looking at other parameters such as growth rate, price growth rate, and profit versus risk-taking. This implies that they have had similar growth over the last financial year. However, despite such similarities, other aspects draw the line between the two. One such factor is the market cap. The S&P market cap stands at $144 billion that of Moody’s corp, which is 60.3 billion (Ticker On, 2022). Other highs for S& P are the P/E ratio, YTD, annual earnings, more liquid cash, less debt, and higher revenue. These figures stand at -13.475 vs -16.392, -13.475 vs. -16.392, 4.2 vs 3.071B billion, 5.89 billion vs 2.343B, 4.62 vs 8.049B and 8.07 vs 5.969 billion for S& P and Moody’s corp the figures respectively (Ticker On, 2022). Hence, these differences draw the line in valuation between the two companies. Based on these figures, it is possible to analyze the financial strength of the two companies. The companies show comfort in doing so when looking at the capacity to handle their interests from their debts. Although, these companies enjoy comfort in their loan interests despite having different values or sizes. The comparison is based on the company’s assets, and comparing the two, S&P’s financial strength is double that of Moody’s corp. However, Moody’s corp is ranked a point lower than S&P because it was docked at the point when it was taking more debt.
For S&P, ratings are its largest segment at 45% of its total revenues. The company’s data assets are a contribution to its superior market position. Three companies dominate the rating market, and S&P occupies the top position, attributed to its intangible assets and reputation. For this reason, it has been approved by Chinese regulators to operate in China to attract Chinese investors by showing its credibility. Looking at profitability at S&P, it has rated two points after Moody’s corp. Although Moody’s corp has a better rating, it has lower margins than S&P. Such a finding is not unlikely when the analysis looks at the WCC and ROIC of either company. In addition to the margins, S&P has a higher return on assets which is significantly ahead of Moody’s corp. The only advantage that Moody’s corp derives is its growth metrics, which are higher than that of S&G. An element that stands out for moody is its exponentially growing profits compared to its revenue.
In a virtual portfolio, S&P would be the fittest choice. Choosing to invest in S & p would occur despite the rapid growth of Moody’s corp. Even though the profits at Moody’s corp surpass its revenue, S&P is a better choice due to its superior market position, the recent acquisition of IHS, and its approval to operate in China. IHS provides and is against the company as it offers additional strength to the company’s data and informational services, creating a one-stop-shop and scale enhancement. In addition, it brings private markets and new data categories such as fixed income. The performance of v has been exceptional, and with the recent trends, it is likely to sustain its performance in the long run. On such a current trend is its entry into the Chinese market. The company has gained approval from the Chinese ratings market regulator, which ranks the third most lag in the bonds market. Therefore, if the company builds its credibility and attracts Chinese investors with time, it will be in a position for exponential growth.
References
Abbot, R. (2020). Comparing the 2 Big Rating Agencies: Moody’s and S&P Global. Yahoo finance. https://finance.yahoo.com/news/comparing-2-big-ratings-agencies-224759646.html. Accessed on 5th March 2022.
Lewis J. (2021). S&PM Global.
Macroaxis LLC. (2022). Moody’s Stock Valuation. Macroaxis.https://www.macroaxis.com/valuation/MCO/Moodys-Corp. Accessed on 5th March 2022.
Moody’s corp. (2021). Moody’s Acquires PassFort and Agrees to Acquire Kompany, Expanding KYC and Compliance Capabilities. Moody’s. com. https://ir.moodys.com/press-releases/news-details/2021/Moodys-Acquires-PassFort-and-Agrees-to-Acquire-kompany-Expanding-KYC-and-Compliance-Capabilities/default.aspx. Accessed on 5th March 2022.
Ticker on. (2022). MCO vs. SPGI. Compare Fundamental and Technical Ratings. https://tickeron.com/compare/MCO-vs-SPGI/. Accessed on 5th March 2022.
Yahoo finance. (2022). S&P Global Inc. (SPGI). Yahoo finance. https://ca.finance.yahoo.com/quote/SPGI/key-statistics/. Accessed on 5th March 2022.
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