Assessing S&P Global’s (SPGI) Valuation as Long-Term Returns Outpace Recent Performance

S&P Global (SPGI) has quietly continued its work in the financial data and analytics sector, offering investors steady exposure to essential market infrastructure. With a history stretching back over a century, its diversified business remains an anchor for many portfolios.

See our latest analysis for S&P Global.

After a steady climb throughout much of the past year, S&P Global’s share price has recently cooled. The stock is up just 0.7% year-to-date, while the 1-year total shareholder return sits at -3.8%. Despite the short-term ebb in momentum, long-term shareholders still see impressive gains, with a 3-year total shareholder return of 42% and 53% over five years. This highlights the company’s resilience and compounding potential.

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With the stock trading near its recent highs but trailing analyst targets by a wide margin, investors are left to wonder: is S&P Global’s current price a bargain hiding in plain sight, or has the market already factored in its future growth?

Price-to-Earnings of 35.8x: Is it justified?

S&P Global currently trades at a price-to-earnings (P/E) ratio of 35.8x, standing well above both sector and peer averages. This raises important questions about how the market is valuing its long-term earnings potential.

The price-to-earnings ratio measures how much investors are willing to pay for each dollar of the company's earnings. It is commonly used to gauge whether a stock is priced fairly relative to company performance and industry standards. High values often signal market optimism or premium positioning.

S&P Global’s current P/E ratio exceeds both the US Capital Markets industry average of 23.9x and its closest peers, who average 31.7x. This suggests the market is pricing in strong expectations for the company’s future growth and profitability, potentially beyond what is seen in the broader sector. Compared to an estimated fair P/E ratio of 18.2x, S&P Global's valuation appears stretched, indicating the stock could face downward pressure if earnings growth does not materialize as strongly as anticipated.

Explore the SWS fair ratio for S&P Global

Result: Price-to-Earnings of 35.8x (OVERVALUED)

However, sustained overvaluation or slower than expected revenue growth could cause sentiment to shift, putting additional pressure on S&P Global’s share price.

Find out about the key risks to this S&P Global narrative.

Another View: Discounted Cash Flow Says Overvalued

While the price-to-earnings ratio signals that S&P Global is trading at a premium, our DCF model offers a different perspective. According to our analysis, the shares trade well above their estimated intrinsic value of $313.36. This suggests that the stock may be overvalued from a cash flow standpoint. Could the market be too optimistic, or are there qualitative factors not reflected in the numbers?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out S&P Global for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 920 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own S&P Global Narrative

If you see things differently or want to test your own insights, you can compile your personal view in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding S&P Global.

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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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