SPGI - Embedded Expectations Analysis - 2019 04 29
S&P Global Inc. (SPGI:USA) currently trades near historical highs relative to UAFRS-based (Uniform) Earnings with a 31.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, and management is confident in the potential of their Chinese subsidiary, free cash flow and EPS growth, and data quality.Specifically, management is confident in their Chinese expansion, their existing relationships with Chinese clients, and the demand for independent analytics among Chinese investors. In addition, they are confident in their free cash flow, revenue, and adjusted EPS growth, and in the growth potential of their structured finance offerings, non-transaction subscription revenue, public finance issuances, and their RatingsXpress product. Moreover, they are confident in industry inflows into ETFs, Ratings segment pricing power, financial leverage optimization initiatives, and data quality. They are also confident in their Powering the Markets of the Future framework.
S&P Global is a provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The company's segments include: S&P Global Ratings, which provides credit ratings, research and analytics; S&P Global Market Intelligence, which provides multi-asset-class data, research and analytical capabilities that integrate cross-asset analytics and desktop services; S&P Global Platts, which provides information and benchmark prices for the commodity and energy markets; and S&P Dow Jones Indices, which provides a variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.
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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