Moody's Corporation
MCO
$470.50
+1.35%
Moody's Corporation is a global provider of credit ratings and analytical tools, operating through two primary segments: Moody's Investors Service (MIS), which rates corporate, structured finance, financial institution, and public finance debt, and Moody's Analytics (MA), which delivers data, research, and decision solutions. Alongside S&P Global, Moody's operates as a dominant duopolist in the credit ratings industry, a position underpinned by regulatory recognition, brand trust, and deep integration into fixed-income capital markets. The current investor narrative centers on the resilience of the ratings franchise amid a strong debt issuance cycle, with Q2 2026 revenue growing 15.1% year-over-year to $2.185 billion, and the growing contribution of Moody's Analytics, which now represents roughly 59% of total segment revenue. Debate also focuses on the stock's underperformance relative to the broader market, with shares down 5.7% over the past year versus a 16% gain in the S&P 500, raising questions about whether the recent weakness represents a buying opportunity or a reflection of structural headwinds such as AI-driven disruption fears and margin pressure.…
MCO
Moody's Corporation
$470.50
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Investment Opinion: Should I buy MCO Today?
The synthesized recommendation is Buy, anchored by the analyst consensus rating of Buy (mean 1.71) and an average target price of $560.38, implying 20.7% upside. The core thesis is that Moody's is a high-quality compounder with accelerating revenue growth (15.12% YoY in Q2 2026), exceptional margins (40.18% net margin), and strong free cash flow ($3.398 billion TTM), trading at a reasonable forward PE of 24.53x despite a premium trailing multiple.
Supporting evidence includes: 1) Revenue growth accelerated to 15.12% in Q2 2026 from 8.6% in Q2 2025, with sequential gains over three quarters. 2) Net margin expanded to 40.18% from 30.45%, and operating margin improved to 47.87% from 44.42%. 3) Free cash flow of $3.398 billion TTM provides ample liquidity for dividends and buybacks. 4) The forward PE of 24.53x is below the trailing PE of 37.21x, suggesting earnings growth is expected. 5) The implied upside to the average analyst target is 20.7%, with no recent downgrades.
The biggest risks are: 1) Valuation compression if growth slows, given the premium trailing PE. 2) AI disruption fears that could pressure margins and market sentiment. 3) A slowdown in debt issuance due to macroeconomic factors. The rating would upgrade to Strong Buy if revenue growth exceeds 20% and margins hold above 40%, or downgrade to Hold if revenue growth falls below 10% or if the forward PE exceeds 30x without commensurate growth. Relative to its history and peers, the stock appears fairly valued on forward earnings but slightly overvalued on trailing metrics, offering a balanced risk/reward for long-term investors.
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MCO 12-Month Price Forecast
Moody's presents a compelling bull case driven by accelerating revenue growth, exceptional margin expansion, and strong cash flow generation. The forward PE of 24.53x is attractive given the 15% revenue growth and 40% net margin, and the analyst consensus target implies 20.7% upside. However, the stock's relative underperformance and premium trailing valuation warrant caution, and AI disruption fears could pressure the multiple. I would upgrade to high confidence if Q3 2026 results show continued revenue acceleration above 15% and margin expansion, or downgrade to neutral if revenue growth falls below 10% or if margins compress.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Moody's Corporation's 12-month outlook, with a consensus price target around $557.33 and implied upside of +18.5% versus the current price.
Average Target
$557.33
0 analysts
Implied Upside
+18.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$470 - $610
Analyst target range
The stock is covered by 21 analysts, with a consensus recommendation of "Buy" and a recommendation mean of 1.71 (where 1 is Strong Buy and 5 is Strong Sell). The average target price is $560.38, implying a 20.7% upside from the current price of $464.23. The consensus leans bullish, supported by recent institutional ratings that show mostly Overweight or Outperform ratings from firms like Wells Fargo, Baird, and JP Morgan, with no recent downgrades.
The target price range spans from a low of $470 to a high of $610, with the low target representing a 1.2% upside and the high target implying a 31.4% upside. The high target assumes successful execution of growth initiatives, margin expansion, and a favorable debt issuance environment, while the low target likely prices in slower growth, margin compression, or a more challenging macro backdrop. The relatively tight spread between the low and average targets suggests strong conviction among analysts, while the wide gap to the high target indicates potential upside if the company outperforms. Institutional ratings show a pattern of stable to positive actions, with no recent downgrades, reinforcing the bullish sentiment.
Bulls vs Bears: MCO Investment Factors
The bull case is currently stronger, supported by accelerating revenue growth, exceptional margin expansion, and a consensus Buy rating with 20.7% upside to the average target. However, the bear case highlights significant relative underperformance, premium valuation, and negative momentum that cannot be ignored. The most important tension is whether the recent revenue acceleration and margin gains can be sustained amid AI disruption fears and a potential slowdown in debt issuance. If Q3 2026 results show continued growth and margin resilience, the stock could re-rate toward analyst targets; if growth decelerates or margins compress, the premium valuation could lead to further downside.
Bullish
- Accelerating Revenue Growth: Q2 2026 revenue grew 15.12% year-over-year to $2.185 billion, accelerating from 8.6% growth in Q2 2025. This marks the third consecutive quarter of sequential revenue improvement, from $1.889 billion in Q4 2025 to $2.079 billion in Q1 2026 to $2.185 billion in Q2 2026.
- Exceptional Margin Expansion: Net margin expanded to 40.18% in Q2 2026 from 30.45% a year earlier, while gross margin rose to 76.29% from 67.65% and operating margin improved to 47.87% from 44.42%. These margins are well above the industry average for financial data and exchange companies.
- Strong Free Cash Flow Generation: Q2 2026 free cash flow was $874 million, contributing to a trailing twelve-month FCF of $3.398 billion. The company returned $1.547 billion through stock repurchases and $180 million in dividends in Q2 2026 alone, demonstrating robust capital return capacity.
- Analyst Consensus Buy with Upside: 21 analysts rate the stock a Buy with a mean recommendation of 1.71, and the average target price of $560.38 implies 20.7% upside from the current price of $464.23. The low target of $470 still represents a 1.2% gain, indicating strong downside protection.
Bearish
- Significant Relative Underperformance: The stock is down 5.73% over the past year versus a 16% gain in the S&P 500, resulting in a relative strength of -21.73%. This persistent underperformance suggests structural headwinds or waning investor confidence.
- Premium Valuation on Trailing Earnings: The trailing PE of 37.21x is at a 49-86% premium to the industry average PE of 20-25x. The price-to-book ratio of 22.57x is near the higher end of its historical range, leaving little room for error.
- Negative Recent Momentum: The stock has declined 2.18% over the past month and 4.73% over the past three months, contrasting with the 8.61% gain over six months. This divergence signals a loss of upward momentum and potential trend reversal.
- AI Disruption Fears: Recent news highlights AI disruption fears impacting S&P Global, a close peer, which saw a 25% stock decline. Similar concerns could pressure Moody's ratings and analytics businesses, potentially compressing margins.
MCO Technical Analysis
Moody's is in a broad consolidation phase, with the current price of $464.23 sitting 15.1% above its 52-week low of $402.28 but 15.1% below its 52-week high of $546.88, placing it at approximately 51% of its 52-week range. The 1-year price change of -5.73% reflects a sustained downtrend relative to the broader market, while the 6-month change of +8.61% suggests a recovery attempt that has since stalled. This mid-range positioning indicates neither a clear momentum breakout nor a deep-value falling knife, but rather a market awaiting a catalyst to resolve the directional bias.
Recent momentum has turned negative, with a 1-month decline of -2.18% and a 3-month decline of -4.73%, contrasting sharply with the 6-month gain of +8.61%. This divergence signals a loss of upward momentum and potential trend reversal, as the stock has given back a significant portion of its earlier recovery. Relative strength versus the S&P 500 is notably weak across all timeframes, with a 1-month relative strength of -4.30% and a 1-year relative strength of -21.73%, indicating persistent underperformance. The short ratio of 4.19 suggests moderate bearish sentiment, though not extreme, while the average volume of 588,267 shares provides adequate liquidity for institutional positioning.
Key technical support is anchored at the 52-week low of $402.28, a level that, if breached, could trigger accelerated selling and signal a deeper downtrend. Resistance is established at the 52-week high of $546.88, and a breakout above this level would require a decisive shift in momentum, likely driven by positive earnings or a favorable macro backdrop. The stock's beta of 1.346 indicates it is approximately 35% more volatile than the broader market, which has important implications for position sizing and risk management, especially given the current max drawdown of -23.61% from peak levels.
Beta
1.35
1.35x market volatility
Max Drawdown
-23.6%
Largest decline past year
52-Week Range
$402-$547
Price range past year
Annual Return
-2.8%
Cumulative gain past year
| Period | MCO Return | S&P 500 |
|---|---|---|
| 1m | -0.9% | +1.8% |
| 3m | -4.9% | +3.5% |
| 6m | +5.3% | +11.2% |
| 1y | -2.8% | +19.1% |
| ytd | -5.7% | +14.1% |
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MCO Fundamental Analysis
Moody's revenue trajectory remains robust, with Q2 2026 revenue of $2.185 billion representing 15.12% year-over-year growth, accelerating from the 8.6% growth implied by Q2 2025 revenue of $1.898 billion. The multi-quarter trend shows consistent sequential improvement, with revenue rising from $1.889 billion in Q4 2025 to $2.079 billion in Q1 2026 and $2.185 billion in Q2 2026. Segment data reveals that Moody's Analytics contributed $1.284 billion, or 58.8% of total segment revenue, while Moody's Investors Service generated $901 million, highlighting the growing diversification away from cyclical ratings revenue. This growth trajectory supports the investment case for Moody's as a resilient compounder, though the deceleration in ratings revenue growth could pose a risk if debt issuance slows.
Profitability remains exceptional, with Q2 2026 net income of $878 million and a net margin of 40.18%, up from 30.45% in Q2 2025. Gross margin expanded to 76.29% in Q2 2026 from 67.65% a year earlier, while operating margin improved to 47.87% from 44.42%. The company's EBITDA of $989 million in Q2 2026, with an EBITDA margin of 45.26%, underscores its strong operational leverage. These margin levels are well above the industry average for financial data and exchange companies, reflecting Moody's pricing power and the scalability of its ratings and analytics businesses.
Moody's financial health is solid, with a debt-to-equity ratio of 1.81, a current ratio of 1.74, and a return on equity of 60.66%, indicating efficient capital deployment. Free cash flow for Q2 2026 was $874 million, contributing to a trailing twelve-month FCF of $3.398 billion, which provides ample liquidity to fund dividends, share repurchases, and strategic investments. The company returned $1.547 billion through stock repurchases and $180 million in dividends in Q2 2026 alone, demonstrating a strong commitment to shareholder returns. The FCF yield of approximately 3.7% (based on $3.398 billion FCF and $91.5 billion market cap) is modest but sustainable, supported by a payout ratio of 28.5% and a dividend yield of 0.77%.
Quarterly Revenue
$2.2B
2026-06
Revenue YoY Growth
+15.1%
YoY Comparison
Gross Margin
76.3%
Latest Quarter
Free Cash Flow
$3.4B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is MCO Overvalued?
With net income positive at $878 million in Q2 2026, the PE ratio is the primary valuation metric. The trailing PE of 37.21x compares to a forward PE of 24.53x, implying the market expects significant earnings growth, with the gap suggesting a 34% earnings expansion is priced in. This forward multiple is more aligned with the company's historical growth trajectory, but the trailing premium reflects the market's optimism about future profitability.
Compared to the financial data and stock exchange industry, Moody's trades at a premium, with a price-to-sales ratio of 11.85x and an EV/EBITDA of 24.51x. The industry average PE for this sector is typically in the 20-25x range, placing Moody's trailing PE of 37.21x at a 49-86% premium. This premium is justified by Moody's superior net margin of 31.86% and operating margin of 44.77%, which are well above industry norms, as well as its wide economic moat and consistent cash flow generation.
Historically, Moody's PE ratio has ranged from 22.5x to 54.3x over the past three years, with the current trailing PE of 37.21x sitting in the middle of that band. The price-to-book ratio of 22.57x is near the higher end of its historical range, while the price-to-sales ratio of 11.85x is below the historical average of around 40x, though this is distorted by the recent decline in market cap. The current valuation suggests the market is pricing in moderate growth expectations, with the stock trading at a discount to its historical PS multiple but a premium on earnings-based metrics.
PE
37.2x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 23x~52x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
24.5x
Enterprise Value Multiple
Investment Risk Disclosure
Moody's faces financial and operational risks primarily from its premium valuation and dependence on cyclical debt issuance. The trailing PE of 37.21x is significantly above the industry average of 20-25x, leaving little margin for error if earnings disappoint. While the debt-to-equity ratio of 1.81 is manageable, the company's high payout ratio of 28.5% and substantial share repurchases ($1.547 billion in Q2 2026) could strain liquidity if free cash flow declines. Additionally, revenue concentration in Moody's Investors Service (41.2% of segment revenue) exposes the company to fluctuations in debt issuance volumes, which are sensitive to interest rate changes.
Market and competitive risks include valuation compression if growth slows, as the forward PE of 24.53x already prices in 34% earnings expansion. The stock's beta of 1.346 indicates it is 35% more volatile than the market, amplifying downside during market corrections. AI-driven disruption fears, as seen with S&P Global's 25% decline, could spill over to Moody's, potentially eroding its moat in ratings and analytics. Regulatory risks also persist, as credit rating agencies face ongoing scrutiny, and any adverse regulatory changes could impact pricing power and profitability.
The worst-case scenario involves a combination of a slowdown in debt issuance, margin compression from AI disruption, and a market-wide selloff. In this scenario, the stock could retest its 52-week low of $402.28, representing a 13.3% decline from the current price of $464.23. If the bear case target of $470 is breached and negative momentum accelerates, the stock could fall further to the analyst low target of $470, though that is above the current price. A more severe downside to $402.28 would equate to a loss of approximately 13.3% from current levels, and if the market enters a bear phase, the max drawdown of -23.61% could be revisited, implying a potential decline to around $355.
FAQ
The key risks include: 1) Financial risk: The premium trailing PE of 37.21x leaves little room for error, and a slowdown in debt issuance could pressure ratings revenue (41.2% of segment revenue). 2) Competitive risk: AI-driven disruption, as seen with S&P Global's 25% decline, could erode Moody's moat and margins. 3) Macro risk: With a beta of 1.346, the stock is 35% more volatile than the market, and a recession could reduce debt issuance and trigger a selloff. 4) Company-specific risk: Regulatory scrutiny of credit rating agencies could lead to fines or operational restrictions. The most severe risk is a combination of these factors, which could drive the stock to its 52-week low of $402.28, a 13.3% decline.
The 12-month forecast includes three scenarios: Bull case (30% probability) targets $560-$610, assuming revenue growth above 15% and margin expansion. Base case (50% probability) targets $500-$560, assuming steady 10-12% revenue growth and stable margins. Bear case (20% probability) targets $402-$470, assuming a debt issuance slowdown and margin compression. The base case is most likely, supported by the analyst average target of $560.38 and the forward PE of 24.53x. The key assumption is that debt issuance remains healthy and Moody's Analytics continues to grow at low double-digits, offsetting cyclical ratings revenue.
MCO's valuation is mixed: the trailing PE of 37.21x is at a 49-86% premium to the industry average, suggesting overvaluation on historical earnings. However, the forward PE of 24.53x is more reasonable, implying the market expects 34% earnings growth. The price-to-sales ratio of 11.85x is below the historical average of around 40x, though this is distorted by the recent market cap decline. Compared to peers like S&P Global, MCO's premium is justified by its superior net margin of 31.86% and operating margin of 44.77%. Overall, the stock appears fairly valued on forward earnings but slightly overvalued on trailing metrics, with the market pricing in moderate growth expectations.
From a risk/reward perspective, MCO appears attractive for long-term investors, with a consensus Buy rating and an average target price of $560.38 implying 20.7% upside. The company's Q2 2026 revenue grew 15.12% year-over-year, and net margin expanded to 40.18%, demonstrating strong operational momentum. However, the trailing PE of 37.21x is at a premium to the industry average of 20-25x, and the stock has underperformed the S&P 500 by 21.73% over the past year. The biggest downside risk is a retest of the 52-week low of $402.28, representing a 13.3% decline. For investors with a long-term horizon and tolerance for volatility (beta 1.346), MCO is a good buy on dips, but near-term caution is warranted given negative momentum.
MCO is more suitable for long-term investment, given its wide moat, recurring revenue from Moody's Analytics (58.8% of segment revenue), and consistent free cash flow generation ($3.398 billion TTM). The stock's beta of 1.346 and max drawdown of -23.61% indicate higher volatility, making it less ideal for short-term trading. The dividend yield of 0.77% is modest, so income-seeking investors may find better options. Earnings visibility is strong, with 21 analysts covering the stock and a consensus Buy rating. A minimum holding period of 2-3 years is recommended to ride out cyclical downturns and benefit from long-term compounding.