5
S&P Global Inc. (SPGI)
- Equity
- US
- Financial Services
RISK
RETURN
Key risk factors
Low price volatility
Good trading liquidity
Limited default risk
Key return factors
Strong margins and returns
Greatly overvalued vs peers
Decent dividends
Corporate actions & dividendsDividend of USD 0.910 with an ex-date of 28 May 2024.
Company profileS&P Global Inc., together with its subsidiaries, provides credit ratings, benchmarks, analytics, and workflow solutions in the global capital, commodity, and automotive markets. It operates in six divisions: S&P Global Ratings, S&P Dow Jones Indices, S&P Global Commodity Insights, S&P Global Market Intelligence, S&P Global Mobility, and S&P Global Engineering Solutions. The S&P Global Ratings division operates as an independent provider of credit ratings, research, and analytics, offering investors and other market participants information, ratings, and benchmarks. The S&P Dow Jones Indices division is an index provider that maintains various valuation and index benchmarks for investment advisors, wealth managers, and institutional investors. The S&P Global Commodity Insights division offers data and insights for global energy and commodity markets and enable its customers to make decisions. The S&P Global Market Intelligence division delivers data and technology solutions for customers to provide insights for making decisions. It offers data and services that bring end-to-end workflow solutions, including capital formation, data and distribution, ESG and sustainability, leveraged loans, private markets, sector coverage, supply chain, and issuer solutions, as well as credit, risk, and regulatory solutions. The S&P Global Mobility division provides insights derived from unmatched automotive data, enabling its customers to anticipate change and make decisions. The S&P Global Engineering Solutions division offers engineering expertise and solutions in industries, such as aerospace and defense, energy, architecture, construction, and transportation. Its solutions empower business and technical leaders to transform workflows and make decisions. S&P Global Inc. was founded in 1860 and is headquartered in New York, New York.
Valuation: Greatly overvalued
Multiple
TTM
NTM
P/E
48.70
40.30
PEG
2.80
-
P/B
4.00
3.30
P/S
10.70
10.20
P/FCF
34.90
23.50
EV/EBITDA
26.70
23.60
From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, and overvalued on P/FCF.
Performance: Mixed
The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 4ppts over six months and grown 4ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.
Analyst view: Somewhat favourable
The average target price is 494 and suggests 13% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 538.4. This translates into 23% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 400.0. This is equivalent to 9% downside potential in the worst case.
Profitability: Strong
RoE
S&P Global Inc. reported a return on equity (RoE) of 8.2% in the last 12 months, up from 7.4% in FY23. The market consensus projects an RoE of 9.2% in FY24, again behind its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 4.7% in the last 12 months, an increase from 4.3% in FY23. The market analysts predict that RoA will be 6.2% in FY24, again weaker than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) grew to 5.2%, below the peers. The consensus estimate for FY24 for RoCE is 10.4%, again behind the peers.
Net margin
EBITDA margin
Historically, SPGI has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 22.0%, a growth from 21.0% in FY23. The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 43.1% in the last 12 months, up from 41.8% in FY23.
RoIC / WACC = 1.6(good value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.6 in the past several years. This ratio implies a good shareholder value creation. Growth: Average
Revenue
EBITDA
EPS
Free cash flow
SPGI reported revenue of USD 12 828mn in the last 12 months, up 3% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 8% from FY23 to USD 8.94. Market expects EPS to reach USD 10.91725 in FY24.Revenue growth has been moderate in the past several years (positive-to-neutral), while EBITDA growth has been steady. Net income has fallen in recent years (negative). The FCF trend is in line with EBITDA. We emphasize the highly volatile dynamics of FCF.
Dividends: Decent
Dividend paid
Dividend yield
The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been low and below its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.
Default risk: Limited
The risk of default is minimal. We note robust profitability, adequate interest coverage, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to excessive margin volatility.
Volatility: Low
In normal market circumstances, SPGI is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to minimal. Finally, it may be affected by inherently volatile sector.
Stress-test: Modest
In highly turbulent market conditions, SPGI is as volatile as an index. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. At the same time, due to inherently volatile sector, its maximum losses could be limited.
Selling difficulty: Low
SPGI boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.