A Snapshot Of S&P Global’s Business And Key Drivers
S&P Global (NYSE: SPGI) is a provider of ratings, benchmarks and other data to capital and commodity markets globally. The company’s customers include asset managers, investment and commercial banks, trading firms and capital issuers. It serves its customers via a broad range of products distributed through third party and proprietary distribution channels.
In the last year, S&P Global’s stock price has increased by around 40%. Our dashboard series on the company is aimed towards providing a step by step approach to users to estimate the company’s valuation and analyze whether another rally in the stock price is likely. The first two dashboards in this series provide some background and inputs to the valuation dashboard.
In this first dashboard, we provide a brief background on S&P Global’s business and industry trends. You can access the below charts on our dashboard platform here.
Business Segments
S&P Global operates three key business segments. The Ratings segment – which provides credit ratings, research and analytics to investors, issuers and other market participants – is the largest segment, accounting for around 50% of the company’s revenues. The Market and Commodities Intelligence segment provides several tools to users aimed towards tracking performance, generating investment ideas and managing risk. The Indices segment maintains a wide array of indices to suit the needs of passive investors.
Geographically, the U.S. is the largest region for S&P Global Inc, accounting for more than 60% of its revenues.
Industry Overview
The total revenue generated by the credit rating industry is estimated at around $11 billion in 2017 and the industry grew at an annual rate of approximately 7% between 2012-17. Growth in the credit rating industry depends on credit growth in the economy, as that generally leads to more rating opportunities. A healthy global economy is one of the key revenue drivers of the industry, as the volume of financial transactions (issuance of loans, etc) is directly linked to the health of the economy. The U.S. economy is expected to grow between 2-3% in the next two years, which is considered an ideal range. Strong economic growth in other regions, coupled with a stable U.S. economy, will likely impact revenues of the credit rating industry positively in the next few years.
Key Competitors
S&P Global is one of the three major credit rating agencies. The company’s top competitors are Moody’s and Fitch. The industry is highly concentrated in the U.S., as the four largest firms account for 60% of the industry revenue in the region.
The below chart compares historical revenues of S&P Global and its peers:
* Revenues of Fitch Group for 2017 are an estimate number, since this data is not publicly available, after Fitch’s parent company was taken private.
S&P Global’s revenues are the highest among its peers, though Moody’s has been growing at a faster rate. Moody’s saw 17% growth in revenues in 2016-17, compared to 7% for S&P Global in the same period.
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