S&P Global (SPGI) and Moody’s Corporation (MCO) are two of the most dominant players in financial data, credit ratings, and analytics. This has made them instrumental players in the global financial infrastructure. Both companies have built resilient, asset-light business models that generate high margins and significant recurring revenue. While their core businesses revolve around credit ratings, their respective trajectories have diverged: SPGI has sprawled into a diversified data business, while MCO has doubled down on credit and risk analytics.
By exploring their business models, strategies, financial performance, capital allocation, valuations, and risks, we will answer the question: Which of these companies presents the better investment opportunity today?
Business Models: Diversification vs. Specialization
S&P Global and Moody’s share their foundation in credit ratings with a combined ~80% market share (~20% for Fitch) in the ~$12 trillion in annual global rated debt issuance. Their moats are grounded in trust and regulatory necessity which drive high barriers to entry, pricing power, and network effects. But where S&P has cast a wide net, Moody’s has remained focused on its niche.
S&P spans five segments: Ratings (credit assessments), Market Intelligence (financial data and analytics), Indices (S&P Dow Jones benchmarks), Commodity Insights (energy and commodity pricing), and Mobility (automotive insights). Its $44 billion acquisition of IHS Markit in 2022 added expertise in financial data, market research, and analytics which bolstered S&P’s Market Intelligence division.
Moody’s has two units: Moody’s Investors Service (MIS, credit ratings) and Moody’s Analytics (MA, risk analytics and compliance tools). Moody’s focus on strengthening its analytics business is underscored by acquisitions like RMS and Bureau van Dijk.
Segment Breakdown
A direct segment comparison highlights the fundamental differences in business models.
In 2024, S&P’s revenue exceeded $14 billion, growing nearly 14% year-over-year, with Ratings contributing just 34%. S&P’s Ratings segment boasts a robust 63% operating margin, reflecting its scale and efficiency. But the segment is ceding ground to other parts of the business like Indices (9.4%, 70% margin) and Commodity Insights (14.7%, 47% margin). These segments are made up of recurring revenues (80% recurring in non-ratings) in the form of subscriptions and ETF-linked fees, providing S&P with insulation from credit market swings.
Meanwhile, Moody’s $7 billion in 2024 revenue (up 19.8%) leans more heavily on its credit rating business (MIS) at 53.5% of revenues, while Moody’s Analytics (MA) is 46.5% of revenues. As a result, Moody’s thrives when debt issuance surges, as it did in 2024. But the company is less resilient when it slows. This can be seen in the impact to Moody’s 2022 results during which revenues fell as interest rates rose. While the MA segment revenues are 95% recurring, and do offer a buffer, it is not to the degree of S&P’s breadth.
Takeaway
Both companies offer predictability through sources of recurring revenue; however, S&P’s diversification offers protection, while MCO’s concentration will result in more potent results in the right conditions.
Financial Performance Comparison
By reviewing the financial performance of each company, we can see this relationship play out in the numbers.
Growth Trends
Over the past five years, S&P Global has outpaced Moody’s in revenue growth. S&P’s revenue has grown at a 16.2% compound annual growth rate (CAGR) ($7 billion in 2019 to $14 billion in 2024). This is compared to Moody’s 8.0% CAGR ($5 billion to $7 billion). S&P’s comparative performance can be attributed to its multifaceted model.
However, Moody’s 2024 performance (19.8% revenue growth vs. S&P’s 13.7%), driven by transactional ratings, demonstrates its potential for outperformance when conditions are right. In this case, those conditions included robust debt issuance and M&A activity.
Similarly, when looking at free cash flow, the story again comes down to Moody’s more cyclical nature. To put Moody’s 9.4% CAGR into context, 2023 and 2024 saw FCF grow 42% and 56%, respectively. Zoom out to the 5-year performance and this growth is masked by greater swings. Meanwhile, S&P saw FCF grow at a more consistent rate over 5 years (16%), even as IHS Markit’s integration tempered margins post-2022 as we will discuss.
Takeaway
While both company’s have seen reasonable growth, S&P’s diversified revenues have driven more consistent growth, while Moody’s ratings focus has greater volatility.
Profitability & Capital Efficiency
A look at operating margins and returns on invested capital reveal stories of resilience and reinvention after both company’s placed strategic bets.
Now, both Moody’s and S&P operate high-margin businesses, but Moody’s maintains a higher overall operating margin on an unadjusted basis. This is due to its focus on credit ratings, which benefits from scale. S&P, however, has demonstrated remarkable resilience as it adapts to the large acquisition of IHS Markit.
However, S&P’s GAAP margins fell to 32.2% in 2023 under IHS Markit’s integration weight, but margin recovery is underway. The company’s adjusted operating margin of 49.0% in 2024 reflects synergistic effects across its segments as well as revenue outpacing expense growth. Its ROIC, at 8.0%, has climbed slowly post-acquisition impact in 2022, bolstered by $5.57 billion in free cash flow. Economic value creation, however, will require both growth and normalization of debt levels.
Moody’s journey has been steadier. Its GAAP margin dipped to ~36% in 2023 as a result of the integration of RMS. But surged to 40.6% in 2024, while its adjusted margin reached 48.1%. This is a testament to the company’s moat in ratings and cost efficiency. Moody’s ROIC of ~18% (recovering from its post-acquisition impairment in 2022) paired with $2.52 billion in FCF, showcases a lean compounder.
Takeaway
S&P’s margins and ROIC are healing from its major acquisition, while Moody’s ratings focus and moat deliver steady profitability and ROIC.
Strategic Priorities & Growth Drivers
Future financial performance will be dictated by both macro conditions, and more importantly, growth strategies.
S&P’s business diversity gives them exposure to secular trends. The company is leveraging AI to enhance financial intelligence, expanding into private credit and ESG (via the IHS Markit acquisition), and benefiting from the rise in passive investing through its indices business. Unlike Moody’s, S&P also has its Commodity Insights and Mobility segments which add proprietary pricing data and automotive data. With growth across segments, management projects 5-7% revenue growth and reinvestment in AI and Indices to sustain double-digit EPS growth.
Moody’s, meanwhile, remains more focused on credit and risk analytics, using AI to drive efficiencies, margins, and growth. Its MA segment has integrated ESG compliance and regulatory solutions like KYC (Know Your Customer) and AML (Anti-Money Laundering). Recent acquisitions like, aforementioned, RMS for $1.9 billion (climate risk analytics) and Bureau van Dijk for $3.5 billion strengthened private company data and alternative credit analysis. For 2025, MCO forecasts 7-9% revenue growth and low double digit earnings growth with cost savings pushing margins to 50% in 2025.
S&P’s strategy presents the company with more opportunities for growth like Indices exposure to the $7 trillion ETF market and a unique moat offered by the Commodity Insights and Mobility data businesses. While Moody’s focus on credit and risk could benefit from its reputation and network effects.
Takeaway
S&P offers multiple growth levers compared to Moody’s bets on fewer growth drivers and credit cycle strength.
Capital Returns & Balance Sheet
Both S&P and Moody’s have demonstrated a commitment to returning capital to shareholders.
Over the past five years, S&P has generated ~$20 billion in FCF. Of that, they have returned over $13 billion to shareholders (~68% of FCF). This includes nearly $5 billion in dividends. This has grown consistently from from $561 million in 2019 to $1.1 billion in 2024 (a 0.9% yield), with about $8.5 billion in buybacks, paused in 2022 for IHS Markit acquisition. We can argue this was a prudent, responsible move to digest the additional ~$8 billion debt load it took on.
However, repurchases were reinstated in 2023 ($2.5 billion) and 2024 ($3.3 billion). And management has stated they are committed to returning 85% of FCF to shareholders. Despite its increased debt, S&P sported a net debt/EBITDA ratio of 1.5x at the end of 2024. While elevated relative to itself, this is still manageable.
Moody’s, on the other hand, has generated over $11 billion in FCF over the same five years, and has returned $7.7 billion (~69% of FCF) to shareholders. Dividends totaled $2.96 billion, and climbed from $378 million in 2019 to $620 million in 2024 (0.8% yield). Share buybacks totaled ~$4.7 billion. Moody’s net debt/EBITDA ratio around 1.2x illustrates management’s disciplined approach.
Takeaway
S&P’s larger FCF fuels its generous capital returns despite higher debt, while Moody’s disciplined approach maximizes returns from a leaner base.
Valuation
Both S&P Global and Moody’s trade at premiums to the market, justified by wide moats, consistent profitability, and predictable cash flows.
Below are 2025 adjusted forward multiples based on guidance as well as 10-year averages to gauge relative value.
S&P’s 2025 multiples depict a stock trading at or below historic multiples. This pricing reflects its 16% five-year CAGR and diversified growth outlook, yet remains reasonable as IHS Markit synergies mature and financial markets normalize post-2024’s strength.
Moody’s multiples reflect confidence in its ratings durability and its 8% CAGR. We can posit that Moody’s management expression of confidence in lower interest rates (expectation for 2 rate cuts) and continued normalization of the M&A market will drive earnings growth through 2025. However, Moody’s trades at a premium to S&P’s despite cyclical risks.
A reverse DCF, assuming a 9.5% WACC, 4% terminal growth, and consistent share buybacks, implies the market is pricing in FCF growth of ~9% for S&P and ~11% for Moody’s. S&P’s 9% growth expectation aligns with its historical 16% FCF CAGR and diversified 5–7% revenue growth forecast for 2025. We can argue that this is achievable given its broad growth levers. Moody’s 11% growth stretches beyond its 9.4% FCF CAGR. This will require relying on sustained credit market strength and its analytics business to drive revenue growth which is a taller order comparatively.
Takeaway
S&P’s valuation offers growth at a fair premium with achievable FCF targets, while Moody’s higher multiples undervalue risks. This assessment favors S&P’s upside potential.
Risks: What Could Derail Them?
While each of these businesses benefits from wide moats specifically in their core ratings businesses, no company is without risks. Many of these have been discussed throughout the comparison so these will only be discussed briefly.
S&P’s 33.9% Ratings exposure will soften interest rate hits relative to Moody’s. However, its Market Intelligence business faces competition from worthy competitors like Bloomberg and FactSet. Further, the integration of IHS Markit lingers.
Moody’s 53.5% Ratings business reliance amplifies rate sensitivity as its 2025 outlook assumes two Fed cuts, a gamble if tightening persists. Regulatory scrutiny shadows both, though Moody’s compliance focus adds greater exposure.
Takeaway
S&P’s has risks, but its diversity mitigates the largest risk, credit market volatility; Moody’s ratings reliance heightens exposure to this risk.
The Verdict: Better Investment Today
Ultimately, this appears to be a matter of a preference, and also, one of timing.
Today, however, S&P offers a better risk/reward. The blend of diversified growth, a more compelling valuation, improved efficiencies post acquisition, and secular tailwinds create a compelling opportunity. Moody’s does offer margin strength, and solid returns on capital while also possessing a strong moat in its core ratings business. Still, I would argue that S&P’s risk, namely IHS Markit debt and competitive pressures are less of a concern than Moody’s cyclical exposure and richer valuation.
Both companies are long-term compounders, and I would be happy to own either particularly on weakness. But for Moody’s, a pullback is more necessary while S&P Global appears to offer a better opportunity today.
Disclosure: I hold a long equity position in SPGI and MCO.
