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S&P Global rates the creditworthiness of bonds and issuers, licenses the S&P 500 and related indices, sells financial data and workflow software, and publishes Platts commodity benchmarks. Customers are debt issuers, asset managers, exchanges, banks and commodity firms. [S1][S9]
Roughly 46% of revenue is subscriptions, 22% per-transaction ratings fees, 9% basis-point fees on assets tracking its indices, and the rest usage-based royalties. Ratings and Indices produce 63% of adjusted operating profit. [S1][S9]
Explore the research to see how business evidence informs assumptions and valuation.
Start with the business evidence, then follow the assumptions through to scenarios and valuation.
Valuation and assumptionsOne of the most durable franchises in public markets, at its cheapest multiple in five years, is still priced at 25x forward earnings. Quality is not the question; duration of growth is.
The weighted average required return of a company's debt and equity providers, used to discount cash flows to the firm.
In this report: At 8.85% the base case is $364; at 8.10% it is exactly today's price. The discount rate moves this valuation more than any operating assumption except the permanent growth rate.
Written at USD 443.5100; now USD 410.71000000 (-7%). Upside to the weighted case has moved from -17% to -10%.
Four divisions: Ratings sells credit opinions to debt issuers, about half charged per bond; Indices licenses the S&P 500, earning basis points on $6.35 trillion of ETF assets; Market Intelligence sells data subscriptions; Energy sells Platts benchmarks. Ratings and Indices are 48% of revenue, 63% of profit.
The sensitivity of operating profit to changes in revenue when some operating costs are fixed.
In this report: Ratings transaction revenue carries roughly an 85% incremental margin because rating more bonds costs almost nothing extra. That is why a 25% transaction-revenue quarter produced 310 basis points of divisional margin expansion, and why margin falls just as fast when issuance turns.
The price implies owner free cash flow compounding at roughly 5.5% in perpetuity at a 9.4% cost of equity, or a 7.2% revenue CAGR for fifteen years with margins reaching 56%: the franchise outgrowing nominal world GDP indefinitely.
A valuation model that works backward from a share price to find combinations of growth, margins, and other assumptions consistent with that price.
In this report: The price implies a 7.2% fifteen-year revenue CAGR with margins reaching 56%, or 5.5% perpetual free-cash-flow growth. Naming that assumption is the core of the disagreement with the market.
The weighted average required return of a company's debt and equity providers, used to discount cash flows to the firm.
In this report: At 8.85% the base case is $364; at 8.10% it is exactly today's price. The discount rate moves this valuation more than any operating assumption except the permanent growth rate.
Hold. Fading growth from 7.4% to 4.0% over fifteen years gives $364, 18% below the price; probability-weighted value is $368. Expected five-year return is about 5.5% a year against a 9.4% cost of equity, roughly 10% from fundamentals less multiple compression. The weakness in my own case: $364 is 20.6x forward earnings, a multiple this stock has not seen in five years.
The discount rate moves fair value about $40 per 50 basis points, more than any operating variable except permanent growth. It is where my valuation and the market's most plausibly diverge.
The weighted average required return of a company's debt and equity providers, used to discount cash flows to the firm.
In this report: At 8.85% the base case is $364; at 8.10% it is exactly today's price. The discount rate moves this valuation more than any operating assumption except the permanent growth rate.
AI capital expenditure decelerates, hyperscaler issuance falls back, and ratings transaction revenue drops with 85% incremental margins in reverse. Clients replace mid-tier data subscriptions with language models over cheaper feeds, cutting Market Intelligence growth to 2%. The market reprices it as low-growth financial infrastructure.
The AI build-out proves a decade-long capital cycle. Private-markets ratings, growing 60%, scale materially, and Kensho licensing converts trialling clients into consumption revenue because models need verified data. Market Intelligence re-accelerates; the AI fear premium unwinds.
Market Intelligence organic growth: above 7% for two quarters supports the thesis, below 3% for three quarters breaks it.
Ratings non-transaction revenue growth, now 8%. Below 3% for three quarters signals franchise erosion, not mean reversion.
Billed issuance, $1,268bn in Q2 2026. Two quarters of year-on-year decline would confirm the AI capital cycle has turned.
Could not establish: subscription retention rate or annual contract value for Market Intelligence (not disclosed by the company, while MSCI and Moody's disclose equivalents); the exact ownership split of the S&P Dow Jones Indices joint venture, where the Q3 2025 10-Q extract read states a 61% interest against the widely reported 73/27 split with CME Group, so the noncontrolling interest was modelled from the observed income-statement deduction instead; stock-based compensation expense, which the platform does not store and which was not located in the filings read; research and development expense; the reconciliation of management's 2.7x-2.8x gross-leverage guidance to the disclosed balance sheet, against roughly 1.9x computed here; post-spin adjusted free-cash-flow guidance; and the terms and renewal timing of the Cboe SPX index licence.
These model scenarios depend on their inputs. Review the assumptions and supporting evidence alongside the implied values.
earnings multiple v2 · as of 2026-09-12
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