Moody's Trades at 37 Times Earnings Ahead of Its July 22 Report. Is the Wide-Moat Ratings Giant Worth the Premium?

3 weeks ago 10

Leo Sun, The Motley Fool

Mon, July 20, 2026 astatine 6:50 AM CDT 3 min read

Moody's (NYSE: MCO), 1 of the largest providers of fiscal data, analytics, and recognition standing services successful the U.S., is often considered an evergreen stock. It shares a near-duopoly successful the fiscal information marketplace with S&P Global (NYSE: SPGI), and some companies service a wide scope of businesses and fiscal institutions.

However, Moody's banal has stayed astir level twelvemonth to date, underperforming the S&P 500's 9% gain. It besides looks historically costly astatine 37 times its trailing earnings, portion the S&P 500 trades astatine 32 times earnings. Should you inactive put successful Moody's earlier its second-quarter net study connected July 22, oregon should you hold for it to chill disconnected to much tenable valuations?

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What is Moody's banal treading water?

Moody's usually thrives successful bull and carnivore markets, since its customers volition usage its services to marque informed fiscal decisions careless of the market's wide direction. In 2022 and 2023, rising involvement rates curbed request for its recognition standing services, which are utilized to o.k. caller indebtedness offerings, but that concern recovered arsenic involvement rates fell successful 2024 and 2025.

Moody's has besides been upgrading its level with caller AI features to process its fiscal information much efficiently and widen its moat against AI-powered challengers. It's besides integrating those services into Amazon Web Services (AWS) and Microsoft's Copilot to support gait with the displacement toward unreality and AI services.

For 2026, Moody's expects its gross to turn by the precocious azygous digits, its adjusted operating borderline to grow from 51.1% successful 2025 to 52%-53%, and for its adjusted EPS to emergence 10%-14%. It besides aims to allocate astir of its escaped currency travel (FCF) of $2.8-$3.0 cardinal toward $2.5 cardinal successful buybacks (equivalent to astir 3% of its marketplace headdress of $89.2 billion).

That outlook is bright, but 2 large issues are weighing down its stock. First, galore analysts expect involvement complaint hikes successful the 2nd fractional of 2026 if ostentation doesn't chill down. That unit could interaction its standing services for caller indebtedness issuances. Second, the market's enthusiasm for its AI initiatives -- on with its rosy guidance for the remainder of the twelvemonth -- inflated its valuations. Rising involvement rates could compress those valuations and thrust investors toward cheaper stocks.

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