Stock Analysis & Valuation Moody's Corporation (0K36.L)

• Previous Close: £516.57
• Sector Valuation Confidence Level: High

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	244.60	-53
Intrinsic value (DCF)	255.92	-50
Graham-Dodd Method		n/a
Graham Formula	233.30	-55

Strategic Investment Analysis

Company Overview

Moody's Corporation (LSE: 0K36.L) is a globally recognized integrated risk assessment firm headquartered in New York, USA. Operating through two key segments—Moody's Investors Service and Moody's Analytics—the company provides essential credit ratings, risk management solutions, and data-driven insights to financial markets worldwide. Moody's Investors Service is a dominant player in credit ratings, covering corporate, financial, governmental, and structured finance securities across approximately 140 countries. Meanwhile, Moody's Analytics delivers subscription-based research, economic forecasting, and risk management software, serving institutional clients with data-driven decision-making tools. With a legacy dating back to 1900, Moody's has established itself as a trusted authority in credit risk assessment, influencing trillions in global debt markets. The company's diversified revenue streams, strong brand equity, and regulatory moat make it a critical player in the financial services sector. Its dual-segment approach ensures resilience, balancing cyclical credit rating demand with stable recurring revenue from analytics subscriptions.

Investment Summary

Moody's Corporation presents a compelling investment case due to its entrenched market position, high-margin business model, and recurring revenue from analytics subscriptions. The company benefits from a duopoly in credit ratings alongside S&P Global, creating significant barriers to entry. Its strong free cash flow generation ($2.84B operating cash flow in FY 2023) supports consistent dividends ($3.58/share) and share buybacks. However, risks include regulatory scrutiny of the ratings industry, cyclical exposure to debt issuance volumes, and competition in analytics from fintech disruptors. The stock's beta of 1.40 suggests higher volatility than the broader market, reflecting sensitivity to financial market conditions. Long-term growth hinges on expanding analytics offerings and leveraging AI-driven risk assessment tools.

Competitive Analysis

Moody's Corporation maintains a competitive advantage through its globally recognized brand, regulatory licenses, and entrenched relationships in the credit ratings space. Its Investors Service segment operates in a duopoly with S&P Global, benefiting from high switching costs and regulatory requirements for Nationally Recognized Statistical Rating Organization (NRSRO) ratings. The Analytics segment competes in a broader but growing market for risk management solutions, where differentiation comes from proprietary datasets and integrated workflows. Moody's has successfully cross-sold analytics products to its ratings client base, creating synergies. However, the rise of alternative data providers and AI-driven credit models presents disruption risks to traditional ratings methodologies. The company counters this by investing in technology—particularly in ESG scoring and predictive analytics—while leveraging its gold-standard historical data. Its main vulnerability lies in potential regulatory changes that could reduce reliance on issuer-paid ratings models. Geographic diversification (operations in ~140 countries) provides stability against regional economic downturns.

Major Competitors

• S&P Global Inc. (SPGI): S&P Global is Moody's primary competitor in credit ratings, with comparable scale and NRSRO status. Its acquisition of IHS Markit strengthened its analytics capabilities, particularly in commodities and trade data. S&P has a slight edge in corporate credit ratings market share, while Moody's leads in structured finance. Both face similar regulatory risks, but S&P's more diversified revenue (including Platts commodity pricing) provides additional stability.
• Moody's Corporation (MCO): Note: This is the NYSE-listed share class of the same company (ISIN US6153691059). The LSE-listed 0K36.L is a secondary listing. Both represent identical underlying business operations and competitive positioning.
• FactSet Research Systems Inc. (FDS): FactSet competes with Moody's Analytics in providing financial data and workflow solutions, particularly to asset managers. It has stronger penetration in buy-side institutions but lacks Moody's credit ratings authority. FactSet's leaner operations result in higher operating margins (~35% vs. Moody's ~30%), but it cannot match Moody's integrated ratings-analytics ecosystem.
• MSCI Inc. (MSCI): MSCI is a key competitor in indices and ESG analytics, areas where Moody's is expanding. MSCI's strong brand in equity indices (ACWI, etc.) gives it an advantage with institutional investors, while Moody's has deeper fixed-income expertise. MSCI's ESG ratings compete directly with Moody's Vigeo Eiris offerings, with clients often using both for diversification.
• IHS Markit Ltd. (INFO): Prior to its acquisition by S&P Global, IHS Markit was a formidable competitor in specialized data (e.g., automotive, maritime) and trade processing. Its strengths in derivatives and reference data complemented S&P's ratings business, creating a more comprehensive competitor to Moody's. Post-merger, the combined entity poses greater competition in analytics.