Moody’s: A Wonderful Business at a Fair Price
Initiation of Coverage (MCO US) (Buy): We look at this key Warren Buffett and Chris Hohn holding, just as bond issuance is expected to shrink in 2025.
“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” - Warren Buffett, Berkshire Hathaway shareholder letter (1989)
Highlights
Moody’s is a wonderful business that benefits from major structural trends.
Ratings business is cyclical, but fast-growing Analytics is dampening volatility.
We see ~10% Adjusted EBIT CAGR, based on attributes and track record.
2025 guidance assumes MSD-HSD issuance decline and implies ~35x P/E.
At $471.88, we see annualized return at 8.7% by 2028, but 10%+ over time.
Introduction
We are initiating our coverage of Moody’s Corp. with a Buy rating. Shares are currently flattish year-to-date but have risen by 15.6% in the past year and 76.8% in the past 5 years:
Moody’s Share Price (Last 5 Years)
Source: Google Finance (15-Jun-25).
Moody’s is a high-quality long-term compounder and is a key holding at Warren Buffett’s Berkshire Hathaway and Chris Hohn’s TCI, among others. We believe shares can generate a ~9% annualized return over the next few years from their current price, and they are a prime buy candidate in the event of any pullbacks during market dislocations.
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