S&P Global is a leading provider of financial intelligence, offering credit ratings, market data, indices, and analytics that are essential to global markets. With a strong competitive position built on regulatory entrenchment, proprietary data, and high customer reliance, the company benefits from recurring revenue and strong cash flow generation. As it continues to expand through innovation, AI-driven solutions, and strategic acquisitions, S&P Global is well-positioned for long-term growth. The question remains: Should this financial powerhouse have a place in your portfolio?
This is not a financial advice. I am not a financial advisor and I only do these posts in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.
For full disclosure, I should start by mentioning that at the time of writing this analysis, I do not own any shares of S&P Global. If you would like to view the stocks in my portfolio or copy my portfolio, you can do so on eToro. Instructions on how to do so can be found here. I don't own any stocks in S&P Global's competitors either. Thus, I have no personal stake in S&P Global. If you want to purchase shares (or fractional shares) of S&P Global, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.
The Business
S&P Global is a leading provider of financial intelligence, offering credit ratings, benchmarks, analytics, and workflow solutions across global capital, commodity, and automotive markets. The company operates through five core segments. S&P Global Ratings provides credit ratings for corporations, government entities, and structured finance products, making it a key player in debt markets. S&P Global Market Intelligence offers data, analytics, and software solutions for financial professionals, including investors, banks, and corporations. S&P Dow Jones Indices manages benchmark indices, including the S&P 500 and Dow Jones Industrial Average, generating revenue through licensing fees tied to index-based investment products. S&P Global Commodity Insights delivers market intelligence, price benchmarks, and analytics for commodity markets, serving industries like energy, agriculture, and metals. S&P Global Mobility provides automotive data and analytics, covering vehicle sales, production forecasts, and market trends. The majority of S&P Global’s revenue, 56 percent, comes from subscription-based services, ensuring predictable, recurring cash flows. The remainder is generated through transactional fees, licensing, and royalties, creating a diversified revenue base. S&P Global benefits from a strong competitive moat, driven by high barriers to entry, brand trust, regulatory entrenchment, and network effects. The credit rating industry functions as a duopoly between S&P Global and Moody’s, with Fitch as a distant third. Regulations and the long-established credibility of these firms make it extremely difficult for new competitors to enter the market. Many investment mandates and financial regulations require ratings from recognized agencies, ensuring a steady demand for S&P’s services. The company also dominates financial indices, with the S&P 500 being the most widely used benchmark for global equity markets, tracking over $15 trillion in assets. Licensing fees from ETFs, mutual funds, and derivatives linked to S&P indices provide stable and growing revenue. Combined with its leadership in financial data and analytics, S&P Global’s entrenched position in the global financial system makes it a resilient and highly profitable business.
Management
Martina L. Cheung serves as CEO of S&P Global, a position she assumed on November 1, 2024. Martina Cheung’s tenure at S&P Global began in 2010 when she joined as Vice President of Operations for S&P Global Ratings. She subsequently held several key positions within the organization, including Chief Strategy Officer and Head of Risk Services for S&P Global Market Intelligence. In 2019, she was appointed President of S&P Global Market Intelligence and later served as President of S&P Global Ratings. In addition to these roles, Martina Cheung acted as the Executive Lead of S&P Global Sustainable1, the company's division focused on ESG solutions. Prior to joining S&P Global, Martina Cheung worked in the consulting industry, first in Accenture’s Financial Services Strategy group and later as a Partner at Mitchell Madison Consulting. She holds a bachelor's degree in commerce and a master's degree in business studies from the National University of Ireland, Galway. Throughout her career, Martina Cheung has been recognized for her leadership and contributions to the financial industry. In 2024, she was named one of the Most Powerful Women in Finance by American Banker and was included in Pensions & Investments' list of Influential Women in Institutional Investing. That same year, INvolve honored her in its 100 Empower Executives list for the second consecutive year. Upon her appointment as CEO, Martina Cheung emphasized the importance of strengthening relationships with key strategic customers. She conducted over 100 meetings with major stakeholders to ensure a smooth leadership transition and deepen customer engagement at the executive level. She stated that this focus aims to build stronger relationships and accelerate responses to customers' challenges. Drawing from her 15 years of experience within S&P Global, Martina Cheung has prioritized aligning go-to-market efforts to meet customer needs, simplifying operations, and fostering growth. She has also highlighted the importance of eliminating silos within the business to ensure seamless collaboration across divisions, thereby delivering greater value to customers. While Martina Cheung is still new in her role as CEO, her deep understanding of S&P Global’s businesses, track record of leadership, and customer-first approach position her well to drive the company’s continued success. Her emphasis on simplification, strategic alignment, and accelerating innovation reflects a commitment to strengthening S&P Global’s competitive edge in financial intelligence. I believe she is the right person to lead S&P Global forward.
The Numbers
The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. S&P Global consistently achieved a high ROIC above 30% every year from 2015 to 2021. However, since 2022, ROIC has fallen below 10%. The primary reason for this decline is the acquisition of IHS Markit. While the acquisition has the potential to drive long-term growth, the upfront costs and ongoing integration expenses have weighed on ROIC in the short term. Additionally, challenging market conditions in the market intelligence segment have further pressured profitability. The new management team has emphasized their focus on ROIC, stating that they are committed to allocating capital to areas that create the greatest long-term value for both customers and shareholders. Given this strategic focus and the expected benefits from fully integrating IHS Markit, I believe ROIC will steadily recover in the coming years, eventually approaching previous levels.
The following numbers represent the book value + dividend. In my previous format, this was referred to as the equity growth rate. It was the most important of the four growth rates I used in my analyses, which is why I will continue to use it in the future. As you are accustomed to seeing numbers in percentage form, I have decided to provide both the actual numbers and the year-over-year percentage growth. The numbers are mixed, which isn’t overly surprising given S&P Global’s history of acquisitions and divestitures over the past decade. These transactions naturally affect equity, as seen in the numbers from 2022 onward, when the acquisition of IHS Markit had a significant impact on the company’s balance sheet. At the same time, steady earnings growth and increasing revenue from core operations have contributed positively to equity over the past three years. Equity has declined slightly over the past two years, but this does not concern me, as we have also seen divestitures, such as the sale of its Engineering Solutions business.
Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins offer a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. It is not surprising to see that S&P Global has consistently generated positive free cash flow every year over the past decade. It is particularly encouraging that the company achieved its highest free cash flow to date in 2024, and management expects this to increase to approximately $6 billion in 2025. Additionally, S&P Global delivered its highest levered free cash flow margin since 2021, further reinforcing its strong cash generation. Management continues to allocate much of its free cash flow toward buybacks and dividends, as demonstrated by the $4,4 billion returned to shareholders in 2024 through these channels. The company recently announced its 52nd consecutive dividend increase and approved a new share repurchase authorization of up to $4,3 billion. Furthermore, it has reaffirmed its commitment to returning at least 85% of free cash flow to investors. The free cash flow yield is at its highest level since 2020, suggesting that while the stock is not necessarily cheap, it is trading at a more attractive valuation than it has in recent years. However, we will revisit valuation later in the analysis.
Debt
Another important aspect to consider is the level of debt. It is crucial to determine whether a business has manageable debt that can be repaid within a three-year period. This is calculated by dividing total long-term debt by earnings. After performing this calculation for S&P Global, I found that the company has 2,98 years of earnings in debt. This falls below the three-year threshold, indicating that debt would not be a concern for me if I were to invest in S&P Global. It is also worth noting that the relatively high debt level is primarily due to the IHS Markit acquisition. The company could have reduced its debt more quickly had it not prioritized returning most of its free cash flow to investors.
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Risks
Competition poses a risk to S&P Global due to the increasing availability of free or low-cost alternatives, advances in technology, and heightened price sensitivity, particularly in its Market Intelligence segment. One of the key risks stems from the growing access to public data sources, many of which are free or relatively inexpensive. With the expansion of the internet, public cloud computing, and open-source software, financial and market data have become more widely accessible at little to no cost. The rapid adoption of AI further accelerates access to publicly available data, making it easier for businesses and individuals to find alternative sources for financial analysis, benchmarking, and market research. As a result, some customers - especially smaller firms and cost-conscious organizations - may opt for these free alternatives rather than paying for S&P Global's premium data and analytics solutions. S&P Global also faces intense competition within financial services, particularly in its Market Intelligence segment. This business competes directly with major vendors like Bloomberg, FactSet, and Refinitiv (owned by the London Stock Exchange Group), as well as smaller, more specialized financial data providers. A more competitive pricing environment has increased price sensitivity among customers, especially in financial end markets, where firms are prioritizing cost reductions and efficiency. During recent earnings calls, management noted rising competitive pressure and a greater focus on pricing across the industry. The competitive landscape includes both established players and emerging challengers. Start-ups leveraging AI and alternative data sources are gaining traction, offering data-driven insights at lower costs. Meanwhile, larger competitors continue to refine their products and pricing models to attract institutional customers.
Lower market volume poses a risk to S&P Global because a significant portion of its revenue depends on financial market activity, particularly in debt issuance, stock market trading, and commodity markets. When economic or political uncertainty reduces transaction volumes, the company’s earnings can be negatively impacted. One of the biggest risks comes from interest rates and market volatility, which directly influence the demand for debt issuance. When interest rates rise or credit spreads widen, companies and governments may issue fewer bonds, leading to lower demand for credit ratings in S&P Global’s Ratings segment. Since this business generates revenue based on new debt issuances, a slowdown in bond markets can significantly impact growth. The company’s Indices business is also highly sensitive to market activity. It earns revenue through licensing fees tied to ETFs, mutual funds, and derivatives that track S&P Global’s indices. If market volatility, economic downturns, or geopolitical uncertainty discourage investors from participating in the stock market, the value of assets in these investment products may decline, reducing S&P Global’s earnings from index-linked products. S&P Global’s Market Intelligence and Commodity Insights segments are similarly vulnerable to market slowdowns. In periods of economic uncertainty, financial institutions, corporations, and investors may cut back on spending for financial data, analytics, and subscription-based research services, lowering demand for S&P Global’s data solutions. The Commodity Insights business, which provides pricing data and benchmarks for energy and raw materials markets, can also be affected if commodity price volatility reduces trading activity and demand for price assessments. Because a portion of S&P Global’s business is directly tied to financial market activity, debt issuance, and investment flows, prolonged periods of low trading volume, reduced debt issuance, or investor caution could significantly impact its revenue and profitability.
Cyber attacks pose a significant risk to S&P Global due to the company’s size, scale, and role in global financial markets. As a provider of credit ratings, market intelligence, financial indices, and commodity benchmarks, S&P Global handles large volumes of sensitive financial data. A security breach could compromise confidential information, disrupt operations, and damage the company’s reputation, ultimately affecting customer trust and financial performance. One of the biggest risks is unauthorized access to material non-public information. S&P Global’s credit ratings and financial analyses often contain confidential data about corporations, sovereign governments, and investment markets. If hackers gain access to this information, it could be misused for insider trading, market manipulation, or corporate espionage, harming both S&P Global’s credibility and the integrity of financial markets. A breach could also erode customer confidence in the company’s ability to protect sensitive information, leading to lost business. Cyber threats are becoming more frequent and sophisticated, ranging from ransomware attacks and phishing scams to state-sponsored hacking attempts. As a high-profile company that influences global markets, S&P Global is a target for financially motivated hackers, cybercriminals, and even nation-state actors. A successful cyber attack could disrupt critical services, including credit rating processes, financial data distribution, and index tracking, resulting in service outages, financial losses, and regulatory scrutiny. Even if an attack does not cause immediate harm, the perception of a security weakness could weaken customer trust and damage the company’s reputation. Ultimately, a major cyber attack could lead to financial losses, legal liabilities, regulatory penalties, and long-term reputational damage. Given S&P Global’s reliance on trust and data security, cyber threats remain a critical risk that could materially impact its business and market position.
Reasons to invest
Secular growth trends are a reason to invest in S&P Global. The company is well-positioned to benefit from long-term structural shifts in global finance, making it an attractive investment. It operates at the intersection of capital markets, data analytics, and financial infrastructure, all of which are experiencing sustained demand growth. One of the key drivers of this growth is the expansion of global capital markets, particularly in emerging economies. As these markets develop, the need for credit ratings, financial benchmarks, and analytical tools will continue to increase. The long-term trend in debt issuance remains positive, with more bond issuances driving demand for S&P Global’s credit ratings and risk assessment services, creating a lasting tailwind for its Ratings segment. Another major growth driver is the increasing reliance on data-driven decision-making in financial markets. As global finance becomes more complex, companies, banks, and investors are overwhelmed by vast amounts of information and require curated, high-quality data to make informed decisions. This trend aligns with S&P Global’s core strengths, as the company provides "essential intelligence" that transforms raw data into actionable insights. The acquisition of IHS Markit has further strengthened its offering by enabling cross-industry insights, such as integrating energy price data with financial market analytics, enhancing its overall value proposition. Sustainability and private markets represent two of the most promising long-term opportunities for S&P Global. The increasing focus on climate risk, ESG investing, and sustainable finance is driving demand for specialized ESG ratings, sustainability-linked indices, and carbon credit benchmarks. S&P Global is uniquely positioned to provide these insights by integrating climate risk data with credit analytics and developing new index products that reflect sustainability trends. At the same time, as private markets continue to grow, investors require better tools for pricing, risk assessment, and valuation - areas where S&P Global can leverage its extensive data expertise and advanced technology. The company also benefits from its global scale, technological capabilities, and strong sales network, which provide a competitive edge in expanding these high-growth markets. By capitalizing on these secular trends, S&P Global is well-positioned for long-term, sustainable growth.
Optimizing its portfolio is a key reason to invest in S&P Global, as the company continuously refines its business mix to focus on high-growth, high-margin opportunities while divesting non-core assets. This strategic approach ensures that S&P Global remains well-positioned for long-term profitable growth, enhancing both operational efficiency and shareholder value. A major part of this strategy involves acquiring best-in-class solutions that strengthen its competitive position. In 2024, S&P Global acquired Visible Alpha and ProntoNLP in its Market Intelligence division and World Hydrogen Leaders in its Commodity Insights division. These acquisitions expand the company's capabilities in financial analytics, AI-driven research, and sustainable energy insights, aligning with long-term trends in data-driven financial services and the energy transition. By integrating these market-leading solutions, S&P Global is enhancing its product offerings and increasing its ability to deliver high-value insights to clients. At the same time, S&P Global is actively divesting non-core businesses to sharpen its focus on its most valuable and scalable segments. The company sold Engineering Solutions in 2023, followed by the divestiture of Fincentric in 2024, demonstrating its ongoing effort to refine its portfolio. This disciplined approach ensures that S&P Global remains the best possible owner of its businesses, prioritizing areas that create the most value for both customers and shareholders. Beyond acquisitions and divestitures, the company is also investing in organic growth, partnerships, and technological innovation. This includes the development of proprietary tools to improve efficiency and productivity, the launch of new financial and commodity analytics products, and strategic partnerships to accelerate market expansion. By balancing internal innovation with targeted acquisitions, S&P Global is positioning itself to scale faster, strengthen its leadership in key markets, and drive sustainable revenue growth.
Innovation is a key reason to invest in S&P Global, as the company continuously develops new products, enhances existing offerings, and integrates cutting-edge technologies like artificial intelligence to strengthen its competitive position. This ongoing innovation supports sustained revenue growth, improves operational efficiency, and deepens customer engagement. A major part of S&P Global’s innovation strategy is reflected in its Vitality Index, a metric introduced in 2022 to track the revenue contribution from new products. The goal is to ensure that as older products mature, they are replaced with innovative solutions that can scale quickly. In 2024, $330 million worth of products graduated from the index, yet S&P Global still grew its Vitality Index to $1,5 billion, representing nearly 11 percent of total revenue. This demonstrates the company’s ability to consistently develop high-impact products that drive long-term financial performance. Artificial intelligence is a significant driver of innovation for S&P Global. The company has introduced AI-powered tools such as Document Intelligence and ChatIQ on Capital IQ Pro, which have already been adopted by 60.000 users. Additionally, the Kensho LLM-ready API is gaining traction as clients seek to integrate S&P Global’s data into their own AI applications. AI remains a key focus, as it enables the company to enhance its products, improve workflow efficiency, and help customers extract greater value from its data. Innovation is also fueling growth in S&P Global’s index business, where the company is expanding into areas such as thematic indices, sustainability indices, and exchange-traded derivatives. With a strong pipeline of new product ideas and a large addressable market, S&P Global continues to innovate across asset classes, ensuring its continued relevance in an evolving financial landscape. By consistently reinvesting in new technologies, product development, and AI-driven enhancements, S&P Global strengthens its business resilience, scalability, and industry leadership. This commitment to innovation not only drives revenue growth but also reinforces its long-term competitive advantage.
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Valuation
Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.
The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 12,35, which is from the year 2024. I have selected a projected future EPS growth rate of 14%. Finbox expects EPS to grow by 14,1% in the next five years. Additionally, I have selected a projected future P/E ratio of 28, which is twice the growth rate. This decision is based on S&P Global's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $216,88. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy S&P Global at a price of $158,44 (or lower, obviously) if we use the Margin of Safety price.
The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 5.689, and capital expenditures were 124. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 87 in our calculations. The tax provision was 1.141. We have 310 outstanding shares. Hence, the calculation will be as follows: (5.689 – 87 + 1.141) / 310 x 10 = $217,52 in Ten Cap price.
The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With S&P Global's free cash flow per share at $17,95 and a growth rate of 14%, if you want to recoup your investment in 8 years, the Payback Time price is $270,78.
Conclusion
S&P Global is an intriguing company with strong management. It has a durable moat supported by high barriers to entry, brand trust, regulatory entrenchment, and network effects. The company has experienced a significant decline in return on invested capital over the past three years, primarily due to its acquisition of IHS Markit. However, I believe ROIC will gradually recover in the coming years, eventually approaching previous levels. Despite this, S&P Global delivered its highest free cash flow ever in 2024 and expects further growth in 2025. Most of this free cash flow will benefit investors through dividends and buybacks. Competition poses a risk as the increasing availability of free or low-cost financial data, advances in AI, and heightened price sensitivity - particularly in the Market Intelligence segment - are putting pressure on its premium data and analytics business. Lower market volume is another risk, as S&P Global’s revenue depends on financial activity, including debt issuance, stock trading, and commodity markets. Economic uncertainty, rising interest rates, or reduced investor participation can slow transactions, impacting demand for credit ratings, indices, and data services, ultimately affecting revenue and profitability. Cyber attacks are also a threat, as the company handles large volumes of sensitive financial data, making it a target for hackers and state-sponsored threats. A security breach could compromise confidential information, disrupt operations, and damage its reputation. Despite these risks, S&P Global is well-positioned to benefit from secular growth trends in global finance, including the expansion of capital markets, increasing reliance on data-driven decision-making, and rising demand for ESG and private market insights. The company’s portfolio optimization strategy enhances long-term growth by acquiring high-value businesses in financial analytics, AI, and sustainable energy while divesting non-core assets. This disciplined approach strengthens its market position, improves operational efficiency, and ensures a focus on scalable, high-margin opportunities. S&P Global’s commitment to innovation further supports long-term growth by continuously developing new products and integrating AI-driven solutions. Its ability to replace maturing products with high-impact offerings strengthens its competitive position and ensures sustained revenue growth. I believe S&P Global is a great company, and buying shares around $400, which is below the Ten Cap price and Payback Time price, should be a good long-term investment.
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