MSCI - Embedded Expectations Analysis - 2020 07 10
MSCI Inc. (MSCI:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings with a 39.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about revenue growth, cost management, and M&ASpecifically, management may be downplaying concerns about lower sales and higher cancellations, and fundamental changes to their pricing ability, and might have concerns about Burgiss's ability to assist clients with their mission-critical content services. Moreover, they may be exaggerating their focus on headcount and non-compensation costs, the attention they give to client engagement, and their progress in adding new thematic indices. In addition, management may lack confidence in their ability to monitor and execute valuable M&A opportunities, grow asset-based fees, and effectively spend capex. Furthermore, they may have concerns about the sales cycle slowing, the shift to funds with lower total expense ratios, and the sustainability of volume growth in futures and options linked to MSCI indices
MSCI is a provider of decision support tools and services for the global investment community. The company's segments are: Index, in which Clients use the company's indexes in various areas of the investment process, including index-linked product creation; Analytics, which provides risk management, performance attribution and portfolio management content, applications and services; Environmental, Social and Governance (ESG), which helps institutional investors understand how ESG considerations can impact the long-term risk and reward of their portfolio and individual security-level investments; and Real Estate, which includes research, reporting, market data and benchmarking offerings.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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