Over the last six months, Moody’s shares have sunk to $455, producing a disappointing 10.7% loss - a stark contrast to the S&P 500’s 9% gain. This might have investors contemplating their next move.
Given the weaker price action, is now a good time to buy MCO? Find out in our full research report, it’s free.
Why Are We Positive on MCO?
Founded in 1900 during America's railroad boom when investors needed reliable information on bond risks, Moody's (NYSE: MCO) provides credit ratings, risk assessment tools, and analytical solutions that help organizations evaluate financial risks and make informed investment decisions.
1. Encouraging Short-Term Revenue Growth
Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. Moody’s annualized revenue growth of 12.4% over the last two years is above its five-year trend, suggesting its demand recently accelerated. 
Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
2. EPS Surges Higher Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Moody’s EPS grew at a spectacular 22.5% compounded annual growth rate over the last two years, higher than its 12.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of financial firm funding. Financial firms maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, Moody's has averaged an ROE of 59.3%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Moody's has a strong competitive moat.
Final Judgment
These are just a few reasons why Moody's ranks highly on our list. With the recent decline, the stock trades at 26.3× forward P/E (or $455 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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