American Invest Hub
  • Politics
  • Investing
  • Business
  • Latest News

American Invest Hub

  • Politics
  • Investing
  • Business
  • Latest News
Business

Moody’s stock has it all, but has one potential risk

by admin September 27, 2024
September 27, 2024
Moody’s stock has it all, but has one potential risk

Moody’s (MCO) stock price has done well over the years, helped by its organic growth and its role in the financial services industry. It has jumped from below $10 in 1998 to almost $500 today, meaning that a $100 investment at the time would now be worth over $7,300.

A leading oligopoly

Moody’s is an oligopoly that competes with two other companies: Fitch and S&P Global. 

It is a well-known brand that is used by most governments and corporations who are raising capital. 

Its services are used by hedge funds, institutional investors, companies, and other organisations

Moody’s is relatively different from S&P Global, which has combined organic growth with acquisitions. For example, it spent $44 billion to acquire IHS Markit. It also acquired companies like FiscalNote, RateWatch, and Kensho Technologies. 

While Moody’s is known for its ratings, the company does other things, including research and insights and data & information. Its research and insights mostly focus on fixed income.

Moody’s business has done well in the past few decades as capital needs have grown substantially. Its annual revenue has jumped from over $4.8 billion in 2018 to over $5.96 billion in the last financial year. 

Interest rates as a catalyst

Moody’s and other rating agencies will likely benefit as interest rates fall. In the US, the Federal Reserve has already slashed rates by 0.50% and hinted that it will continue cutting in its attempts to engineer a soft landing.

The same trend is happening in other countries like South Africa, the European Union, China, and Switzerland. 

Low interest rates will likely lead to more borrowing and corporate activity like M&A. Indeed, recent data shows that companies have announced M&A deals worth over $1.5 trillion this year.

Some of the most notable deals this year are Diamondback Energy’s buyout of Endeavor Energy Partners, Home Depot’s acquisition of SRS Distribution, and Synopsys’s buyout of ANSYS. 

Low rates will also trigger more Initial Public Offerings, especially among companies owned by private equity companies. Most leading PE firms hold hundreds that should now be either taken public or merged. 

Therefore, analysts expect that its revenue will be $1.61 billion in the third quarter while its annual figure will be $14.2 billion.

The most recent results showed that its business was growing, helped by the rising hopes of interest rate cuts. Its quarterly revenue rose to over $1.8 billion, up from $1.49 billion in the same quarter in 2023. Its half-year revenue was $3.63 billion, an increase from $3.4 billion last year.

Good rewarder of shareholders

Moody’s has also been a good rewarder of its shareholders. It has a small dividend yield of 0.72% because of its strong stock performance. Its five-year dividend growth rate has been 11.3%, while its CAGR 10-year growth rate is 11.78%, higher than the sector median of 7.3%. 

Moody’s has a tiny dividend payout ratio of 28%, meaning that it has room to continue growing its payouts to investors. It has also raised its payouts for 14 years, meaning that it is a potential future dividend aristocrat.

At the same time, the company has been reducing the number of its outstanding shares, which has boosted its earnings per share. Its forward EPS growth is 14.35%, higher than the industry median of 3.7%. 

Valuation concern remains

Therefore, with Moody’s, we have a company that is still growing and one that has a long record of rewarding its shareholders.

The main concern is that it is highly overvalued. Data by SeekingAlpha shows that it has a forward PE ratio of 42, higher than the sector median of 11.9. Its EV-to-Sales ratio is 13.5, higher than the sector median of 3.12.

Other metrics show that Moody’s business is expensive. For example, it trades at a price-to-book ratio of 22.85, higher than the sector median of 1.2.

These numbers explains why analysts have a neutral view about its stock. The average estimate for the stock is $481, slightly higher than the current $474.

Moody’s stock analysis

On the monthly chart, we see that the MCO stock rose for four consecutive months before pulling back this month. It has remained above the key resistance point at $397, its highest point in November 2021, and its previous all-time high.

The Relative Strength Index (RSI) and the Stochastic Oscillator have all moved to the overbought level. 

Therefore, in the long term, there is a chance that the stock will continue to do well. However, in the near term, a retest of the support $397 cannot be ruled out. 

The post Moody’s stock has it all, but has one potential risk appeared first on Invezz

0
FacebookTwitterGoogle +Pinterest
previous post
Swiss National Bank lowers interest rates by 25 basis points amid inflation decline
next post
Stocks to watch next week: Tilray, Nike, Carnival, Constellation Brands

Related Posts

Adani group clarifies charges: no FCPA violation for...

November 27, 2024

SoftBank, OpenAI unveil Japan AI joint venture to...

February 3, 2025

Mt. Gox transfers $2 billion in Bitcoin: will...

November 11, 2024

Sell these overvalued Nasdaq 100 stocks at their...

February 20, 2025

HIMS stock crashes 25% on Friday after this...

February 22, 2025

Consumer staples outperform in 2025, but here’s why...

March 10, 2025

Humacyte stock may fail to sustain today’s gains:...

December 21, 2024

Ferrari stock forms a dangerous pattern ahead of...

November 4, 2024

How Hermès stays resilient in economic uncertainty on...

April 20, 2025

Tesla stock price went parabolic: top 4 reasons...

April 10, 2025

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Latest News

    • GMS stock jumps 29% on takeover interest from Home Depot, QXO, analysts raise PTs

      June 22, 2025
    • Japan’s rice price surge: what’s driving it and why it could spark a political crisis

      June 22, 2025
    • BofA raises STOXX 600 target amid resilient global growth, warns on Mideast risks

      June 22, 2025
    • Palantir co-founder: US must prevent Iranian nukes

      June 22, 2025
    • Fed governor Waller advocates for July rate cut amid tariff, labor market outlook

      June 21, 2025

    Categories

    • Business (3,169)
    • Investing (2,522)
    • Latest News (2,000)
    • Politics (1,530)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: americaninvesthub.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 americaninvesthub.com | All Rights Reserved