SPGI - Embedded Expectations Analysis - 2021 08 26
S&P Global Inc. (SPGI:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 34.8x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about their revenue growth, the IHS Markit merger, and recent product launches.Specifically, management may have concerns about the potential of their newly launched climate credit analytics product, Marketplace Workbench, and ESG Dividend Aristocrats Index series. They may also lack confidence in their ability to sustain growth in diluted EPS, segment operating profit margin, and Market Intelligence, Platts, and Ratings revenue. Moreover, management may have concerns about CLO market demand and the pace of the global economic recovery, and they may be exaggerating the potential of their EU Climate Transition Index and the impact of their new Platts energy model's 2-degree warming scenario. Furthermore, they may lack confidence in their ability to capitalize on their potential IHS Markit merger, control expenses, and maintain the number of assets and passive funds invested in their indices.
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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