What Do Recent Moody's Price Gains Mean for Its True Value in 2025?

If you have been watching Moody's stock lately, you are probably weighing your next move after another round of market shifts. Maybe you noticed the modest 2.1% uptick this week or the slight cooling of -3.5% over the last month and wondered, what does this really mean for long-term investors? On a longer horizon, Moody's is hardly a slow mover, with a 109.9% jump over three years and a robust 76.2% gain across five.

The conversation around Moody's often comes back to its role in the financial world and the broader market's changing mood. Investors are clearly reassessing risk, and rating agencies like Moody's are right in the thick of that action. Still, these recent price movements may say as much about investor sentiment as they do about real business fundamentals, especially as economic signals and credit market news swirl in the background. If you are tracking valuation closely, it is worth noting that Moody's current valuation score is 0 out of 6, meaning it does not screen as undervalued by any of the standard checks right now.

Of course, we all know that headline numbers only tell part of the story. Let us dig into how Moody's stacks up under different valuation methods. Stay tuned for a perspective on valuation that could give you an even clearer read on its true potential.

Moody's scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Moody's Excess Returns Analysis

The Excess Returns model evaluates a stock by looking at how much value the company creates above its cost of equity. Essentially, it considers whether Moody's can consistently generate returns for shareholders that exceed what investors require for taking on that equity risk.

For Moody's, the numbers stand out. The current Book Value is $22.02 per share, and future earnings power is represented by a Stable EPS of $16.84 per share. This figure is based on weighted future Return on Equity estimates from 8 analysts. With a Cost of Equity at $2.31 per share, Moody's produces an impressive Excess Return of $14.53 per share. The business is currently generating an average Return on Equity of 60.56%, an extremely strong figure for its industry. Looking ahead, the Stable Book Value is projected at $27.80 per share, drawing from estimates by 5 analysts.

Using these metrics, the Excess Returns model estimates Moody's intrinsic value at $306.16 per share. With the share price currently 60.1% higher than this value, the stock appears significantly overvalued under this approach.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Moody's.

Our Excess Returns analysis suggests Moody's may be overvalued by 60.1%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Moody's Price vs Earnings

For consistently profitable companies like Moody's, the price-to-earnings (PE) ratio is a widely used valuation tool because it anchors price directly to the company's ability to generate profits. When assessing a PE ratio, analysts consider the company's growth prospects and risk profile. Higher growth and lower risk can justify a higher PE, while lower growth and higher risk call for a lower one.

Moody's currently trades at a PE ratio of 41.2x. This is well above both the Capital Markets industry average of 25.7x and the peer average of 31.3x, suggesting a premium in the market’s eyes. However, simple comparisons like these can miss crucial details about each company’s unique strengths and risks.

This is where Simply Wall St's Fair Ratio comes in. The Fair Ratio sets a more precise benchmark by adjusting for Moody's expected earnings growth, profit margins, industry trends, market capitalization, and company-specific risks. By using this approach instead of just industry averages or peer groups, investors get a better sense of what the market should reasonably pay for Moody's shares given all the moving parts.

With a Fair Ratio of 19.6x, Moody's present PE of 41.2x is significantly higher than what the fundamentals warrant. This data signals that, relative to its growth and risk-adjusted potential, Moody’s shares are priced at a considerable premium.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Moody's Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your story about a company, grounded not just in numbers but in your expectations for its future revenue, earnings, and profit margins. Narratives connect why you think Moody’s will succeed or face challenges to your financial forecasts and ultimately to your estimated fair value.

Available right within the Community page on Simply Wall St, Narratives are used by millions to make smarter, more confident decisions. You input your own expectations, quickly generate a fair value, and compare it to today’s price to help you decide if now is the right time to buy or sell. Even better, your Narrative stays up to date by dynamically adjusting as new news or earnings data becomes available.

For example, investors bullish on Moody’s who highlight rapid private credit growth and AI expansion may build a Narrative supporting a high price target like $595. Those more cautious about disruption and regulatory risks may target a much lower value, such as $475. Narratives put the decision-making power in your hands, with real-time data guiding your own view of what Moody's is really worth.

Do you think there's more to the story for Moody's? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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