Moody’s Company (MCO): A Bull Case Principle

We got here throughout a bullish thesis on Moody’s Company on Valueinvestorsclub.com by felton2. On this article, we’ll summarize the bulls’ thesis on MCO. Moody’s Company’s share was buying and selling at $508.00 as of September sixteenth. MCO’s trailing and ahead P/E have been 43.20 and 32.89 respectively in accordance with Yahoo Finance.

TaLaNoVa/Shutterstock.com

Moody’s Company (MCO) stays a compelling funding regardless of being widely known as a high-quality enterprise. The corporate operates by means of two segments: Moody’s Investor Providers (MIS), which accounts for ~70% of EBITDA, and Moody’s Analytics (MA), contributing ~30%. MIS is the second-largest credit standing company globally, working in a extremely concentrated business the place Moody’s and S&P International management greater than 80% market share.

With deep regulatory obstacles and entrenched market positioning, MIS enjoys extraordinary pricing energy and margins close to 60%. Income is essentially issuance-driven, but historical past reveals constant progress, averaging ~6% CAGR over multi-year intervals, with current volatility from the pandemic and rate of interest cycles. In the meantime, MA’s subscription-based mannequin, constructed by means of acquisitions like Bureau van Dijk, RDC, and RMS, delivers >95% recurring revenues and high-single-digit natural progress, balancing MIS’s cyclicality and providing important margin upside from its present ~31%.

The long-term progress outlook for Moody’s is underpinned by regular issuance quantity progress, annual worth will increase, and a strong refinancing tailwind. Roughly $4.9 trillion of U.S. and EMEA company debt matures over the subsequent 4 years, with a very heavy wall in 2028 skewed towards speculative-grade issuance, offering favorable combine advantages. Compounding worth hikes additional improve earnings energy, whereas advances in generative AI promise structural margin growth. Personal credit score, typically cited as a risk, is rising as a progress driver, with Moody’s already profitable mandates and monetizing portfolio-level analytics.

With EBITDA progress poised to compound within the low double digits and free money move per share within the mid-teens, consensus underestimates the sturdiness of MCO’s runway. Even assuming modest a number of compression, upside exceeds 50% over two years, whereas draw back is cushioned by the corporate’s entrenched duopoly, excessive money technology, and historical past of opportunistic buybacks. Catalysts embody 2Q25 earnings and potential price cuts in 2H25.

Beforehand we coated a bullish thesis on Moody’s Company (MCO) by Enterprise Mannequin Mastery in February 2025, which highlighted the corporate’s dominant credit score rankings enterprise, resilient recurring revenues, and increasing analytics division. The corporate’s inventory worth has depreciated roughly by 2.17% since our protection. It’s because issuance exercise confronted cyclical headwinds. The thesis nonetheless stands as Moody’s entrenched duopoly and pricing energy stay intact. felton2 shares an equivalent view however emphasizes refinancing tailwinds and personal credit score progress.