SPGI S&P Global
A regulatory-moated ratings duopoly plus the index business every passive dollar must pay to track.
The business
S&P Global rates credit (bonds/loans) via S&P Global Ratings, sells financial data and analytics through Market Intelligence (including Capital IQ), licenses market indices (S&P 500, Dow Jones) earning fees tied to AUM/trading volume, and sells commodity/energy price benchmarks via Commodity Insights. Revenue is largely recurring subscriptions plus transaction-linked ratings fees.
Quality gate · 70/100
Moat & management
| Moat | wide moat |
| Source | network effect |
| Trajectory | stable |
| Management | excellent |
Ratings is a regulatory-protected duopoly (with Moody's) built on decades of embedded trust in capital markets; the index business benefits from powerful network effects since the S&P 500 is the default benchmark that trillions in passive AUM are contractually pegged to, making displacement nearly impossible; Market Intelligence has high switching costs from embedded analyst/trading workflows.
Capital-light model throws off high-margin FCF (conversion 1.2x), management has consistently shrunk share count (-3.2% CAGR) via buybacks, though the 2022 IHS Markit merger added meaningful leverage that still needs working down.
Owner-earnings inputs
| Owner earnings (TTM) | 4.92B |
| Owner-earnings yield | 4.1% |
| Free-cash-flow yield | 4.6% |
| Growth used (normalized) | 8.0% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 9.4% |
Key risks
- Private credit growth increasingly bypasses public ratings, shrinking the core ratings TAM
- Regulatory/antitrust scrutiny of the ratings duopoly or index-licensing practices
- Ratings revenue is cyclical, tied to debt issuance volumes which can swing with rates
- Elevated debt load from the IHS Markit acquisition limits capital allocation flexibility
Catalysts
- Structural growth of global debt markets and private-market ratings expansion
- Passive investing secular growth continues to compound index licensing fees
- Buybacks accretive to per-share value given capital-light cash generation
- Cross-sell of data/analytics across combined IHS Markit and legacy S&P platforms
Recent news
score · 8 articles
- AI's bottomless pit problem: Investors are scrutinizing costs
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- Update: Dow Hits New High, S&P 500 Retreats as Traders Await Hormuz Deal
- S&P Global (SPGI) Adds With Intelligence Data As Valuation Questions Linger
- Update: Equity Markets Mixed Intraday as US Seen Nearing Hormuz Deal
- $58 billion In Payouts, A Lagging Stock: The T Trade-Off
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⚠ financial — owner earnings ≈ net income · financial — valued by residual income (ROE vs cost of equity on book equity) · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.