Is It Time To Reassess S&P Global (SPGI) After Recent Share Price Pullback?

• If you are wondering whether S&P Global at around US$431 is priced attractively or not, the key question is whether the current share price lines up with its underlying business value.
• The stock has risen 4.5% over the last 7 days, while returns stand at a 2.9% decline over 30 days, a 15.9% decline year to date, and an 11.2% decline over the past year, set against longer term 3 year and 5 year returns of 29.6% and 22.9%.
• Recent coverage of S&P Global has focused on its role as a major provider of financial data and indices, as well as investor attention on how such business models respond to changing market sentiment. This backdrop helps frame the recent share price moves as investors reassess both risk and what they are willing to pay for the company’s earnings and cash flows.
• The company currently scores 2 out of 6 on our valuation checks. This raises fair questions about how different models, such as P/E, multiples and cash flow based approaches, compare and what an even more complete way of looking at value might reveal later in this article.

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 required by its shareholders, and then capitalizes those extra profits into an estimated value per share.

For S&P Global, the model uses a Book Value of US$104.17 per share and a Stable EPS of US$21.08 per share, based on weighted future Return on Equity estimates from 5 analysts. The Average Return on Equity sits at 19.79%, compared with a Cost of Equity of US$8.48 per share. That gap produces an estimated Excess Return of US$12.60 per share.

The analysis also assumes a Stable Book Value of US$106.50 per share, using weighted future Book Value estimates from 4 analysts. Together, these inputs give an intrinsic value of about US$383.26 per share under the Excess Returns framework.

With a recent share price of around US$431, this model indicates the stock is trading about 12.5% above its estimated intrinsic value. On this particular approach, it screens as overvalued.

Result: OVERVALUED

Our Excess Returns analysis suggests S&P Global may be overvalued by 12.5%. Discover 62 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

For a profitable company like S&P Global, the P/E ratio is a useful way to think about valuation because it links what you pay per share to the earnings that each share generates. Investors usually accept a higher or lower P/E depending on what they expect for future growth and how risky they believe those earnings are.

S&P Global currently trades on a P/E of 28.81x. That sits close to the peer average of 28.73x and below the broader Capital Markets industry average P/E of 34.66x. On the surface, this suggests the market is pricing S&P Global roughly in line with similar companies, and at a discount to the wider industry.

Simply Wall St’s Fair Ratio for S&P Global is 17.63x. This is a proprietary estimate of what a “normal” P/E might be given the company’s earnings growth profile, industry, profit margins, market cap and risk factors. Because it adjusts for these fundamentals, the Fair Ratio can give a more tailored view than simple peer or industry comparisons. With the current P/E of 28.81x sitting well above the Fair Ratio, the stock screens as expensive on this metric.

Result: OVERVALUED

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

Earlier it was mentioned that there is an even better way to think about valuation, and on Simply Wall St this comes through Narratives. Here you set out your story for S&P Global, including your fair value, revenue, earnings and margin expectations. The platform links that story to a financial forecast, compares your Fair Value to the live share price to help you judge whether the stock looks attractive or not, keeps your view updated when fresh news or earnings arrive, and lets you see how different investors can look at the same company very differently. For example, one Narrative might assume a fair value closer to the most bullish analyst target of US$625, while another might anchor on the most cautious target of US$480, all side by side in the Community page that is already used by millions of investors.

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.

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