We came across a bullish thesis on S&P Global Inc. (SPGI) on Substack by Business Model Mastery. In this article, we will summarize the bulls’ thesis on SPGI. S&P Global Inc. (SPGI)’s share was trading at $542.70 as of Feb 19th. SPGI’s trailing and forward P/E were 43.94 and 31.55 respectively according to Yahoo Finance.
A bustling trading floor with traders watching the market indices intently.
S&P Global stands as a dominant force in the financial data, analytics, and credit ratings industry, leveraging a diversified business model to maintain resilience across market cycles. In 2023, the company reported $13.6 billion in revenue, distributed across five major segments: Market Intelligence ($5.51 billion, 45%), Ratings ($4.41 billion, 36%), Indices ($1.39 billion), Commodity Insights ($1.25 billion), and Mobility ($1.05 billion). This diverse revenue structure differentiates S&P Global from competitors, reducing its reliance on any single market segment.
The company’s revenue model is largely subscription-based, with over 75% of its income derived from recurring sources. This provides stability even during periods of market volatility, particularly in the debt issuance sector, where S&P Global’s credit ratings business plays a critical role. The Market Intelligence division, offering financial analytics and data, alongside Indices and Commodity Insights, further enhances revenue consistency.
Geographically, S&P Global maintains a strong international presence. In 2023, 60% of its revenue was generated in the United States, with Europe, the Middle East, and Africa (EMEA) contributing 25%, Asia-Pacific 10%, and Latin America 5%. This global footprint allows the company to capitalize on expanding capital markets worldwide, while its Commodity Insights and Indices businesses benefit from global trade and investment trends.
S&P Global also demonstrates strong profitability, with an operating margin of 43.8% and a net margin of 29.1% in 2023. The company’s robust free cash flow generation, totaling $4.23 billion, enables strategic reinvestment in high-growth areas such as ESG ratings, climate analytics, and automotive intelligence. This financial strength is further bolstered by successful acquisitions, including the integration of IHS Markit, which expanded its data and analytics capabilities.
In the credit ratings sector, S&P Global holds a 40% market share, leading the industry ahead of its closest competitor, Moody’s, at 34%. Its dominance in the index business is even more pronounced, powering over 60% of global ETF assets. This entrenched position provides a stable, high-margin revenue stream and further strengthens its competitive advantage.
The company’s strategic differentiation lies in its diversified portfolio. Unlike competitors that rely heavily on credit ratings, S&P Global balances its exposure through multiple business lines, shielding it from cyclical downturns in debt issuance. Additionally, the passive investing boom has fueled demand for its index business, further solidifying its long-term growth trajectory.
As sustainability and ESG investing continue to gain traction, S&P Global is positioning itself as a leader in this space. The company has expanded its ESG offerings, leveraging its data analytics expertise to meet the growing demand for sustainability-driven financial insights. With a formidable competitive moat, strong cash flow generation, and a well-diversified revenue base, S&P Global remains well-positioned for sustained long-term growth in the financial information industry.
S&P Global Inc. (SPGI) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 99 hedge fund portfolios held SPGI at the end of the third quarter which was 85 in the previous quarter. While we acknowledge the risk and potential of SPGI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SPGI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.