MCO Moody's Corporation
Wonderful regulatory duopoly compounder, but today's price bakes in growth well above a conservative decade estimate.
The business
Moody's operates two segments: Moody's Investors Service (MIS), which rates corporate, sovereign, and structured debt for a fee paid by issuers, and Moody's Analytics (MA), which sells data, research, and risk-management software on subscription. Revenue scales with global debt issuance volumes and with growing recurring analytics/software subscriptions.
Quality gate · 92/100
Moat & management
| Moat | wide moat |
| Source | regulatory |
| Trajectory | stable |
| Management | excellent |
Moody's and S&P Global form an entrenched duopoly (with Fitch a distant third) built on NRSRO regulatory designation, decades of embedded reputation, and covenants/regulations that require rated debt — switching costs and brand trust reinforce the regulatory barrier. MA adds a growing recurring-revenue layer with real switching costs from embedded workflows.
Consistent reinvestment into high-return MA acquisitions and data/software buildout, disciplined buybacks that have shrunk share count (~-1% CAGR) rather than chasing overpriced deals, and durable double-digit ROE well above cost of capital.
Owner-earnings inputs
| Owner earnings (TTM) | 2.79B |
| Owner-earnings yield | 3.3% |
| Free-cash-flow yield | 3.5% |
| Growth used (normalized) | 8.0% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 10.6% |
Key risks
- Debt issuance is cyclical and rate-sensitive; a prolonged high-rate or credit-freeze environment can sharply cut MIS transaction revenue
- Litigation/regulatory risk inherent to the issuer-pays rating model, especially around conflicts of interest
- AI/alternative-data tools could erode reliance on traditional agency ratings over a long horizon
- Current valuation embeds very high growth expectations, leaving little margin for cyclical disappointment
Catalysts
- Growth of private credit and non-bank lending creating new ratings demand
- Continued MA mix-shift toward recurring subscription revenue improving earnings stability
- International and emerging-market debt market expansion increasing rateable issuance
Recent news
score · 8 articles
- Italgas SpA (ITGGF) (Half Year 2026) Earnings Call Highlights: Strong Revenue Growth and ...
- Moody's (MCO) Stock Looks Expensive Relative To Fair Value
- European banks pour into risk, compliance and AI to compete: Moody’s
- Does Moody's (MCO) Aggressive Buybacks and AI Deals Reveal a Quiet Shift in Strategy?
- Moody's (MCO) Earnings Beat Puts Valuation Back In Focus
- Global Bonds Are Reeling as Oil Surge Renews Inflation Threat
- Moody's (MCO) Expands Intapp Partnership To Put Risk Data Inside AI Workflows
- Your pension may rely on the ‘optimistic assumption’ that AI will pay off — Moody's sees 'no playbook' for what’s next
⚠ financial — owner earnings ≈ net income · financial — valued by residual income (ROE vs cost of equity on book equity) · Extreme gap to market price — large, well-covered names are rarely mispriced this much; likely embeds risk the model underweights. A flag, not a verdict. · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.