Is It Too Late To Consider S&P Global (SPGI) After Recent Share Price Recovery?

• Wondering whether S&P Global at around US$424 per share still offers value, or if the best part of the opportunity has passed, starts with a clear look at what you are paying for its future cash flows.
• The stock has returned 0.5% over the past week and 1.2% over the past month, but sits on a year to date return of 17.2% decline and a 14.1% decline over the past year, alongside longer term 3 year and 5 year returns of 30.0% and 23.1% respectively.
• Recent coverage of S&P Global has focused on its role as a major provider of indices, credit ratings and financial data, as investors reassess how essential these services are to capital markets. Commentary has also highlighted how sentiment around interest rates, credit conditions and equity markets can influence how investors think about businesses that are closely tied to issuance and market activity.
• Simply Wall St currently assigns S&P Global a value score of 2 out of 6, reflecting that it screens as undervalued on 2 of 6 checks. The sections ahead will unpack how methods like DCF, multiples and fair value estimates contribute to that score, before finishing with a broader way to think about valuation that goes beyond the numbers alone.

S&P Global scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: S&P Global Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to earn above the return that shareholders require, and then capitalizes those extra profits into a fair value per share.

For S&P Global, the model starts with a Book Value of $104.17 per share and a Stable EPS estimate of $21.08 per share, based on weighted future Return on Equity estimates from 5 analysts. That implies an Average Return on Equity of 19.79% on a Stable Book Value of $106.50 per share, which comes from weighted future book value estimates from 4 analysts.

The Cost of Equity is set at $8.53 per share, so the Excess Return is $12.55 per share, which is the profit above what shareholders are assumed to require. By projecting these excess returns forward and discounting them, the model arrives at an intrinsic value of about $379.67 per share.

With the current share price around $424, this Excess Returns valuation points to the stock being about 11.8% overvalued on this framework.

Result: OVERVALUED

Our Excess Returns analysis suggests S&P Global may be overvalued by 11.8%. Discover 52 high quality undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for S&P Global.

Approach 2: S&P Global Price vs Earnings

P/E is a useful yardstick for a profitable company like S&P Global because it directly links what you pay per share to the earnings that support that share price. In general, higher growth expectations and lower perceived risk can justify a higher P/E, while slower growth or higher risk tend to point to a lower, more conservative P/E being appropriate.

S&P Global currently trades on a P/E of 28.36x. That sits close to both the Capital Markets industry average P/E of 27.39x and the peer group average of 28.38x, so on simple comparisons the stock prices in a similar level of expectation as its sector and peers.

Simply Wall St’s Fair Ratio for S&P Global is 18.14x. This is a proprietary estimate of what the P/E might be, given factors such as the company’s earnings growth profile, profit margins, risk characteristics, industry and market cap. Because it blends these elements, the Fair Ratio can offer a more tailored reference point than a straight comparison with broad industry or peer averages.

Comparing the current P/E of 28.36x with the Fair Ratio of 18.14x suggests S&P Global screens as overvalued on this metric.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.

Upgrade Your Decision Making: Choose your S&P Global Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St give you a simple story to attach to your numbers by linking your view of S&P Global's business, your forecast for its future revenue, earnings and margins, and the fair value that falls out of those assumptions. You can then compare that fair value with the current price to help you decide whether the stock looks attractive or stretched. This is all available within an easy tool on the Community page that millions of investors use and that automatically refreshes when new news or earnings arrive. One investor might build a Narrative that focuses on growing demand for ratings, private markets and energy transition data and lands near the higher analyst fair values around US$555. Another might worry more about AI competition, market volatility and segment pressure and end up closer to the lower fair values around US$430.

Do you think there's more to the story for S&P Global? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com