Is S&P Global’s Stock Price Justified After Five Years of 55% Growth?

• Wondering whether S&P Global is trading at a bargain or if the price is outpacing its true worth? You are definitely not alone, as valuation is top of mind for many investors right now.
• The stock has shown a mix of performance lately, with a 1.0% gain over the past week, essentially flat year-to-date, and down 4.5% over the last 12 months. It is also up an impressive 55.0% over five years.
• These price moves have come as the company continues to expand its presence in financial data and analytics, making headlines with strategic acquisitions and partnerships. Investors have taken note of S&P Global's efforts to broaden its offerings and reinforce its role as a leader in the financial information space.
• On our valuation checks, S&P Global earns a score of 1 out of 6 for being undervalued, suggesting there is room for deeper analysis. Let's break down the usual valuation approaches and stick around for a take on an even better way to judge whether the stock is truly compelling.

S&P Global scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: S&P Global Excess Returns Analysis

The Excess Returns valuation model evaluates how much profit a company generates above its cost of capital by weighing return on equity against core growth metrics. For S&P Global, this involves assessing both the efficiency with which the company reinvests shareholder funds and its capacity for ongoing profit expansion.

According to the latest estimates, S&P Global has a Book Value of $109.21 per share, with a Stable Book Value forecast to reach $112.81 per share. Its Stable EPS is projected at $19.45, based on weighted future Return on Equity estimates from four analysts. The company's average return on equity stands at 17.24%, while the cost of equity is $9.32 per share. This results in an excess return of $10.13 per share, showing that S&P Global is producing returns well above its funding costs.

Despite these strong fundamental indicators, the Excess Returns calculation estimates an intrinsic fair value that is 57.1% below the recent share price. In other words, the shares appear significantly overvalued relative to the company’s ability to generate excess profits into the future according to this approach.

Result: OVERVALUED

Our Excess Returns analysis suggests S&P Global may be overvalued by 57.1%. Discover 927 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for S&P Global.

Approach 2: S&P Global Price vs Earnings

The Price-to-Earnings (PE) ratio is widely considered one of the best ways to value profitable companies like S&P Global because it relates the stock’s price to its actual earnings. This makes it easier to gauge what investors are willing to pay for each dollar of profit. This approach is especially meaningful for companies with steady or growing earnings, as it anchors the valuation in real financial performance rather than speculative outlooks.

It is important to remember that what qualifies as a “normal” or “fair” PE ratio is influenced by multiple factors, primarily growth expectations and perceived risks. Faster-growing companies or those with more predictable earnings typically warrant higher multiples, while riskier or slower-growing firms often trade at lower ratios.

Right now, S&P Global trades at a PE ratio of 35.6x. This is noticeably above both the industry average of 23.5x for Capital Markets stocks and the peer average of 31.4x. While these gaps could make the company look expensive based on standard comparisons, a simple peer or sector check does not tell the whole story.

This is where Simply Wall St’s “Fair Ratio” comes into play. The Fair Ratio, set at 18.2x for S&P Global, attempts to capture a more complete picture by factoring not just earnings growth, but also the company’s risks, profit margins, size, and industry profile. This holistic approach means the Fair Ratio can adjust for strengths or vulnerabilities that traditional yardsticks miss.

Comparing S&P Global’s actual PE of 35.6x with its Fair Ratio of 18.2x, the stock appears significantly overvalued by this measure, even before accounting for risks or other qualitative factors.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your S&P Global Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives let you combine your story about a company, such as your expectations for S&P Global’s future growth, earnings, and margins, with realistic financial forecasts and your view of fair value. A Narrative connects your perspective on what drives a business with the numbers behind it, creating a direct link from a company’s story to a clear price estimate.

This tool is available to everyone on Simply Wall St’s Community page, used by millions of investors worldwide. Narratives make it simple to track your thesis and see instantly whether S&P Global is worth buying or selling by comparing your assumed Fair Value to the current price. Whenever key news or a new earnings report arrives, Narratives update automatically, keeping your analysis relevant and fresh.

For example, S&P Global’s highest user-assigned Fair Value on the platform forecasts extremely optimistic growth, while the lowest suggests more caution about future profits. Narratives reflect real investor perspectives, making it easy for you to stress-test your ideas and stay ahead of the curve with every new development.

Do you think there's more to the story for S&P Global? Head over to our Community to see what others are saying!

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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