Although the S&P 500 is down 2.1% over the past six months, Moody’s stock price has fallen further to $443.06, losing shareholders 8.7% of their capital. This may have investors wondering how to approach the situation.
Following the pullback, is this a buying opportunity for MCO? Find out in our full research report, it’s free.
Why Are We Positive On Moody's?
Founded in 1900 during America's railroad boom when investors needed reliable information on bond risks, Moody's (NYSE: MCO) provides credit ratings, risk assessment tools, and analytical solutions that help organizations evaluate financial risks and make informed investment decisions.
1. Long-Term Revenue Growth Shows Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years.
Thankfully, Moody’s 7.5% annualized revenue growth over the last five years was decent. Its growth was slightly above the average financials company and shows its offerings resonate with customers.
2. EPS Surges Higher Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Moody’s EPS grew at a spectacular 22.8% compounded annual growth rate over the last two years, higher than its 14.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.
Over the last five years, Moody's has averaged an ROE of 63.1%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Moody's has a strong competitive moat.
Final Judgment
These are just a few reasons Moody's is a rock-solid business worth owning. With the recent decline, the stock trades at 26.2× forward P/E (or $443.06 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
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