It's been a great morning session for Moody's investors, who saw their shares rise 1.5% to a price of $454.98 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
Moody's's Valuation Is in Line With Its Sector Averages:
Moody's Corporation, together with its subsidiaries, operates as an integrated risk assessment firm in the United States, the rest of the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 15.92 and an average price to book (P/B) ratio of 1.78. In contrast, Moody's has a trailing 12 month P/E ratio of 32.6 and a P/B ratio of 26.54.
Moody's's PEG ratio is 2.06, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues and a Decent Current Ratio:
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $5,371 | $6,218 | $5,468 | $5,916 | $7,088 | $7,718 |
| Interest Income (M) | -$205 | -$171 | -$231 | -$251 | -$237 | -$213 |
| Operating Margins | 44% | 46% | 34% | 36% | 41% | 43% |
| Net Margins | 33% | 36% | 25% | 27% | 28% | 32% |
| Net Income (M) | $1,778 | $2,214 | $1,374 | $1,607 | $2,058 | $2,459 |
| Depreciation & Amort. (M) | $220 | $257 | $331 | $373 | $431 | $480 |
| Diluted Shares (M) | 189 | 188 | 185 | 184 | 183 | 180 |
| Earnings Per Share | $9.39 | $11.78 | $7.44 | $8.73 | $11.26 | $13.67 |
| EPS Growth | n/a | 25.45% | -36.84% | 17.34% | 28.98% | 21.4% |
| Avg. Price | $258.32 | $338.13 | $311.64 | $390.56 | $472.47 | $448.39 |
| P/E Ratio | 27.25 | 28.46 | 41.72 | 44.53 | 41.74 | 32.66 |
| Free Cash Flow (M) | $2,043 | $1,866 | $1,191 | $1,880 | $2,521 | $2,575 |
| CAPEX (M) | $103 | $139 | $283 | $271 | $317 | $326 |
| EV / EBITDA | 20.03 | 22.21 | 28.61 | 30.45 | 27.81 | 22.27 |
| Total Debt (M) | $6,422 | $7,413 | $7,389 | $7,001 | $8,125 | $6,994 |
| Net Debt / EBITDA | 1.47 | 1.81 | 2.54 | 1.94 | 1.73 | 1.2 |
| Current Ratio | 2.03 | 1.61 | 1.72 | 1.74 | 1.47 | 1.74 |
Moody's has growing revenues and increasing reinvestment in the business, generally positive cash flows, and low leverage levels. The company also benefits from strong operating margins with a stable trend, positive EPS growth, and a decent current ratio of 1.74.
