S&P Global Trades at 25 Times Earnings After the Post-Earnings Drop. Is the Ratings Moat Worth It?

S&P Global (SPGI) now trades at a price-to-earnings ratio of 25 following a 16% year-to-date decline and a 6% drop over the past month. The multiple represents the company's lowest valuation since 2022, driven by investor concerns that rising interest rates will pressure its credit ratings business.

The sell-off follows what were otherwise solid second-quarter results. S&P Global posted revenue growth of 10-11% and earnings growth of 18-23%, with its ratings and indexes divisions both delivering record revenues during the period.

The company recently completed the spinoff of its Mobility business, streamlining operations ahead of what management expects to be a challenging rate environment. The ratings division faces headwinds as higher borrowing costs typically slow debt issuance activity, a key revenue driver for the segment.

The valuation compression creates a setup traders are watching closely. SPGI has historically traded at a premium to the broader market given its competitive moat in credit ratings and index licensing, with Moody's (MCO) and Fitch as its only major competitors in the ratings oligopoly.