SPGI - Embedded Expectations Analysis - 2020 03 19
ï€ S&P Global Inc. (SPGI:USA) currently trades near historical highs relative to UAFRS-based (Uniform) Earnings with a 29.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management appears concerned about debt issuance activity, their data solutions capabilities, and declining growth ratesï€ Specifically, management may be concerned about declines in structured finance and S&P 500 Index options activity, slowing EPS and Desktop revenue growth, and the sustainability of current high yield and leveraged loan issuance levels. Moreover, they may lack confidence in their ability to improve their operating profit margin, sustain Ratings segment revenue growth, and manage expenses. Management may also be exaggerating their data solutions capabilities, the potential of their new order to cash system and test centers in India, and the ability of growth in Russia, Turkey, Mexico, and Brazil to offset lower growth across other major markets. Finally, they may be concerned about their timeline to find new asset classes to benchmark and the progress of their ESG data platform and methodologies integration, and they may be downplaying concerns about company debt maturities in the near-term
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
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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