How Does Moody’s Compare To Its Peers?

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INFO: IHS Markit logo
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IHS Markit

Moody’s Corporation (NYSE:MCO) made its largest acquisition to date in 2017, acquiring Bureau Van Djik (an aggregator and distributor of private company data sets) for nearly $4 billion. The company is trying to improve its product offerings, offer high quality services to acquire new rating mandates and expand globally, especially in China. The strong economic environment and large volumes of debt issuances are supporting the company’s growth. In this note, we compare Moody’s Corporation with competitors S&P Global and Fitch Ratings  – the other top credit rating agencies globally – on key operating metrics. You can access these comparative charts in our interactive dashboard on how Moody’s compares to its peers.

Revenue Growth

Moody’s was able to grow its revenues at an impressive rate of 17% in 2017, while the figure for S&P Global was around 7%. This strong growth was due to large volumes of leveraged issuances driving growth of its corporate finance group. Further, the acquisition of Bureau Van Djik in August 2017 boosted the revenues of its Research and Analytics segment significantly. However, despite the stellar growth in 2017, Moody’s still lags behind S&P Global in terms of revenues – as S&P remains the largest player in the industry. We expect Moody’s revenues to grow in the range of 10% for the next two years, and the company will continue to lag behind S&P Global in terms of total revenues. Meanwhile, Fitch is a much smaller player – as its total revenues are only about 25% those of Moody’s.  For more details on Moody’s Corporation’s revenue growth you can see our prior dashboard : An Overview Of Moody’s Corporation’s Revenue Growth

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EBITDA Margin :

Each of the top three players in the credit rating industry generate similar EBITDA (Earnings Before Interest, Tax, Depreciation And Amortization) margins, in the range of 45-47%. S&P Global has been able to expand its margins from 39% to 46% over the last three years despite a larger revenue base, while Moody’s has been able to maintain its margins in the range of 46-47% even after the large acquisition. We expect these margin figures to remain largely steady in the next few years.

Total Debt and Debt/EBITDA Ratio

After its recent acquisition, Moody’s total debt increased significantly, leading to a higher Debt/EBITDA ratio. Historically, Moody’s has been more levered compared to S&P Global, whose growing EBITDA margins and steady debt have led to a declining Debt/EBITDA over the past three years.

Price To Earnings Multiple

Both Moody’s Corporation and S&P Global command a similar P/E multiple of around 29 in 2017, indicating that future growth expectations for both companies are likely similar. For 2019, we estimate this multiple to be around 28x.

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