Looking at S&P Global Inc’s (NYSE:SPGI) fundamentals some investors are wondering if its last closing price of $203.07 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
What can we expect from S&P Global in the future?According to the analysts covering the company, the following few years should bring about good growth prospects for S&P Global. The consensus forecast from 13 analysts is certainly positive with earnings forecasted to rise significantly from today’s level of $6.423 to $10.171 over the next three years. This results in an annual growth rate of 13.70%, on average, which signals a market-beating outlook in the upcoming years.
Is SPGI’s share price justified by its earnings growth?
As Warren Buffett’s right-hand man Charlie Munger said, “No matter how wonderful a business is, it’s not worth an infinite price.” S&P Global is available at price-to-earnings ratio of 31.62x, showing us it is overvalued compared to the US market average ratio of 18.22x , and overvalued based on current earnings compared to the capital markets industry average of 18.09x . This multiple is a median of profitable companies of 25 Capital Markets companies in US including Modern Technology, Neon Capital and Viking Energy Group.
We already know that SPGI appears to be overvalued when compared to its industry average. However, since S&P Global is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 31.62x and expected year-on-year earnings growth of 13.70% give S&P Global a quite high PEG ratio of 2.31x. So, when we include the growth factor in our analysis, S&P Global appears overvalued , based on fundamental analysis.
What this means for you:
SPGI’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Are SPGI’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has SPGI been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of SPGI’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.