Thanks for the write-up! SPGI seems like a great business, but my concern revolves around valuation. The current 40PE implies steady growth of 10%-15% in earnings. However, in case of a recessionary environment, there could be a few quarters of muted growth or even de-growth. In that scenario, i see a de-rating to around 20-25 PE, which will lead to a large draw-down. Anyway, will add this to the tracking list and wait for a buy price which affords higher margin of safety!
Indeed, the high recessionary risk and recent tariffs have increased uncertainty in the US markets. If we do get a broader US market pullback short-term, SPGI could dip into that higher margin-of-safety zone you’re looking for. Appreciate you sharing your take - let’s keep an eye on it together!
I think a de-rating of 20-25 PE might be possible. This took place from May - Oct 2022, with the stock plummeting from $379 (25x PE) to $292 (22x PE). Over the past 5 years, the PE has dropped below 25x around 5% of the time. Peak to trough (36x P/E to 22x P/E) in 2022 lasted around 9 months, with recovery taking another 10 months.
However, SPGI's 5-year historical median P/E sits at around 37x. At today's valuation (Apr 2025), we are close to 37x P/E.
Thanks for the write-up! SPGI seems like a great business, but my concern revolves around valuation. The current 40PE implies steady growth of 10%-15% in earnings. However, in case of a recessionary environment, there could be a few quarters of muted growth or even de-growth. In that scenario, i see a de-rating to around 20-25 PE, which will lead to a large draw-down. Anyway, will add this to the tracking list and wait for a buy price which affords higher margin of safety!
Hi Sharad, thanks for reading!
Indeed, the high recessionary risk and recent tariffs have increased uncertainty in the US markets. If we do get a broader US market pullback short-term, SPGI could dip into that higher margin-of-safety zone you’re looking for. Appreciate you sharing your take - let’s keep an eye on it together!
I think a de-rating of 20-25 PE might be possible. This took place from May - Oct 2022, with the stock plummeting from $379 (25x PE) to $292 (22x PE). Over the past 5 years, the PE has dropped below 25x around 5% of the time. Peak to trough (36x P/E to 22x P/E) in 2022 lasted around 9 months, with recovery taking another 10 months.
However, SPGI's 5-year historical median P/E sits at around 37x. At today's valuation (Apr 2025), we are close to 37x P/E.