Moody's Corporation (MCO) Deep Research Report: Richly Priced Oligopoly or Risky Bet on Perpetual Growth?

Moody’s Corporation sits in a tiny, powerful club that effectively gatekeeps access to global debt markets. Alongside S&P Global and Fitch, it dominates the credit ratings business worldwide, and it pairs that oligopoly position with a growing analytics and SaaS platform that serves banks, corporates, insurers, and governments in more than 40 countries.

From a business-quality standpoint, this is one of the best franchises in financial services. According to Moody’s latest Form 10-K, 2024 revenue climbed 20% to $7.09 billion, GAAP EPS rose 29% to $11.26, and free cash flow reached roughly $2.52 billion. The Ratings (MIS) segment posted about 60% adjusted operating margins, while Moody’s Analytics (MA) delivered around 31%—numbers most businesses can only dream of.

The problem is not the business. The problem is the price.

At a recent share price around $510.85 and a market cap near $91.8 billion, Moody’s trades at roughly 40.9x P/E and 29.2x EV/EBITDA on trailing numbers, per Financial Modeling Prep data cited in our report. Our free cash flow–based DCF points to an intrinsic value reference around $188.6 per share, meaning the stock is about 171% above that conservative estimate. In our view, that leaves a very thin margin of safety even for such an elite franchise.

For long-term shareholders, this is the kind of setup where valuation discipline matters more than ever. For new capital, we think patience is warranted until either the price corrects or the fundamentals move materially ahead of even bullish expectations.

As we walk through the thesis, risks, valuation, and monitoring framework, we’ll share how we’re thinking about Moody’s today and what we’d watch before adding, trimming, or exiting a position.

Moody’s business model: an oligopoly wrapped around high-margin data and software

Moody’s is essentially two businesses under one roof: a ratings gatekeeper and a risk-analytics platform.

According to the 2024 Form 10-K and Wikipedia:

Moody’s Ratings (MIS): Core business: issuer‑paid credit ratings and research on corporate, structured, financial institutions, and infrastructure debt. 2024 revenue: approximately $3.79 billion. Adjusted operating margin: about 60%. Revenue mix includes initial ratings for new issuance and ongoing surveillance/monitoring fees.

Moody’s Analytics (MA): Core business: subscription data, models, SaaS platforms, and research for credit, ESG, climate, and KYC risk. 2024 revenue: about $3.30 billion. Adjusted operating margin: about 31%. Annual recurring revenue (ARR) reached $3.28 billion in 2024, up 9% year over year, with Decision Solutions ARR up 12%.

This combination is powerful:

• MIS throws off extremely high-margin, transaction-driven cash flows when issuance is strong.
• MA diversifies away from pure issuance cyclicality and builds a more stable base of subscription and SaaS revenue embedded in client workflows.

Moody’s now employs roughly 16,000 people globally and supports about 671,000 outstanding ratings with more than 1,600 analysts and supervisors—comparable in analyst scale to S&P, according to Wikipedia’s credit rating agency overview.

That scale, combined with regulatory entrenchment, is what makes Moody’s a structural “tollbooth” in global debt markets.

Moat and competitive dynamics: a powerful, but not unassailable, position

How strong is Moody’s moat today?

The ratings business sits at the center of a highly concentrated oligopoly:

• S&P has around 50% global ratings share.
• Moody’s is estimated at about 31.7%.
• Fitch holds roughly 12.5%.

These “Big Three” control roughly 94% of global ratings volume. The key advantages for Moody’s include:

Regulatory entrenchment

Ratings from SEC‑registered NRSROs (Nationally Recognized Statistical Rating Organizations) are baked into banking capital rules, insurance regulations, and many institutional investment mandates. Dodd–Frank provisions on CRAs make clear the central role of NRSROs in regulation, even as the law tightened oversight and created more liability.

Reputation and history

Moody’s has been a core part of global bond markets for decades. Despite reputational scars from the financial crisis and subsequent $863 million settlement, it remains a go‑to name that issuers and investors recognize and often require. Wikipedia: Moody’s Corporation

Switching costs and workflow integration

In MA, Moody’s data feeds, models, and platforms are deeply woven into bank, insurance, and corporate risk processes. Replacing those systems entails operational risk, retraining, model validation, and often regulatory scrutiny. According to the 2024 10-K, MA’s ARR growth and high retention underscore that embedded nature.

Economies of scale and data network effects

Running global ratings and analytics platforms involves heavy fixed costs in analysts, models, and infrastructure. More volume spreads those costs, while more data improves models. That scale advantage makes it hard for smaller players to replicate Moody’s breadth profitably.

Berkshire Hathaway’s roughly 13.5% stake, noted in Wikipedia, is another strong signal that sophisticated long‑term capital views Moody’s moat as real and durable.

Where is the moat under pressure?

Moody’s moat isn’t bulletproof. We see three main vectors of pressure:

1. Regulatory and legal risk

• Post‑crisis reforms increased scrutiny of credit rating agencies, including annual SEC Office of Credit Ratings (OCR) examinations and potential sanctions.
• Moody’s has already faced major enforcement actions, including the $863 million settlement tied to crisis‑era ratings and a 2024 SEC case alleging recordkeeping failures across six rating agencies.

A material regulatory shift that reduced reliance on NRSRO ratings in rules or mandates would go right at the core of the moat.

2. Technological disruption from AI-native models

New entrants are building real‑time, alternative‑data‑driven credit tools:

• Martini.ai is rolling out real‑time AI corporate credit risk models that deliver continuous risk scores rather than periodic letter ratings. PYMNTS, Aug 2025
• Plaid’s LendScore uses open‑banking and cash‑flow data to assess creditworthiness outside traditional bureau and rating frameworks. PYMNTS, Oct 2025
• Experian and others are embedding Gen AI into model‑risk governance and credit analytics offerings. PYMNTS, Aug 2025

These tools don’t replace NRSRO ratings overnight, but they can erode Moody’s information edge, especially at the margin in corporate lending, private credit, and alternative finance.

3. Issuance cyclicality as a structural vulnerability

MIS remains heavily tied to new debt issuance and refinancing cycles. The 2022 downturn in issuance drove a notable revenue slump before the 2024 rebound, as shown in long‑term revenue trends on Macrotrends.

That cyclicality creates real earnings volatility, which eventually collides with today’s very high multiple.

The company is not ignoring these threats. According to the 10-K, management is actively investing in:

• Climate and catastrophe risk (e.g., RMS).
• Property intelligence (e.g., CAPE Analytics).
• ESG and alternative data (e.g., MioTech).
• Specialized analytics like Praedicat and regional rating agencies like GCR and ICR Chile.

The big question is whether those moves are enough to refresh the moat in an AI‑heavy world and reduce dependence on the ratings cycle.

Recent performance: a strong rebound into a rich multiple

According to Moody’s 2024 10-K and Q3 2025 10-Q:

2024 full year results

• Revenue: $7.09 billion (+20% vs 2023).
• Operating income: $2.88 billion.
• Net income: $2.06 billion, with EPS up 29%.
• Free cash flow: about $2.52 billion.
• MIS revenue: +33% YoY; MA revenue: +8% YoY.

9M 2025 year‑to‑date

• Revenue: $5.83 billion vs $5.42 billion a year earlier (+8% YoY).
• MA revenue: $2.66 billion (+9% YoY).
• MIS revenue: $3.17 billion (+11% YoY).
• MA adjusted operating margin: 32.2% YTD.
• Q3 2025 MIS adjusted margin: 65.2%—hugely profitable on current issuance conditions.
• Free cash flow for the first nine months: $1.80 billion vs $1.92 billion a year earlier, with the decline driven mainly by higher taxes and incentive comp despite stronger operating income.
• Cash & short‑term investments: $2.3 billion; total debt: $7.2 billion at September 30, 2025.

In parallel, returns on equity hover around 52%, and net debt/EBITDA is roughly 1.6x with interest coverage around 16x, according to the FMP metrics cited in the report. That’s a comfortable leverage profile for such a cash‑generative operation.

The equity market has noticed. Over the last 12 months, the stock has returned about 7.9%, but more importantly, the multiples have crept to the top of their historical and peer ranges:

• P/E: ~40.9x.
• EV/EBITDA: ~29.2x.
• P/B: ~23.2x.

To justify that kind of valuation, investors are implicitly underwriting:

• Persistent high‑teens‑type EPS growth or better.
• Continued favorable issuance conditions.
• A moat that remains largely intact despite regulation and AI pressure.
• Limited downside from regulatory or reputational shocks.

For us, that’s a demanding set of assumptions.

Is MCO stock a buy in 2025 for long-term value investors?

From a quality lens, Moody’s is the sort of company many value investors love to own: capital‑light, high‑margin, recurring revenue streams, entrenched competitive position, and shareholder‑friendly capital allocation.

From a valuation lens, though, Moody’s is more controversial.

Our view on margin of safety

Our DCF analysis, built on historical free cash flow trends from sources like Macrotrends FCF data and referencing a 10% discount rate with a 2.5% terminal growth assumption, suggests an intrinsic value reference of roughly $188.6 per share. At a market price around $510.85, the stock trades about 171% above that.

A few key takeaways:

Yes, franchise quality deserves a premium.

Moody’s isn’t a commodity business; it should not trade at “average” multiples. Oligopoly ratings firms and elite information services regularly command high teens to low twenties P/E multiples.

But there’s not much room for error at 40x earnings.

At ~40.9x P/E and ~29.2x EV/EBITDA, you’re paying for a long runway of strong growth plus stable multiples. Any surprise on issuance, regulation, or AI disruption could compress both earnings and those multiples at the same time.

Downside protection is limited by cyclicality.

Strong free cash flow and recurring MA revenue do provide some cushion. But in a deep issuance downturn or regulatory incident, it’s easy to imagine both earnings and sentiment getting hit together, especially starting from these valuations.

In other words, Moody’s is a great business at a demanding price. For us, that points to:

• Potential Sell / trim for existing holders who are overweight or who need to manage valuation risk.
• “Watch and wait” for new capital—seeking either:
• a meaningful pullback (e.g., a cycle‑driven sell‑off), or
• evidence that MA’s recurring analytics business is scaling so fast that it genuinely de‑risks the earnings profile.

This is where scalable research really matters. If you want to quickly compare Moody’s risk/reward to other high‑quality franchises, Read our AI-powered value investing guide to see how investors are using automation to bridge the gap between screeners and deep, filing‑based analysis.

Will Moody’s deliver long-term growth in an AI-first risk market?

The long‑term story Moody’s is selling is compelling: becoming an integrated risk‑data utility, powering credit, climate, ESG, and KYC decisions across the financial system, enhanced by Gen AI and alternative data.

Long-term (2–5 years): integrated risk utility or narrowing moat?

According to the 10-K and industry commentary:

• Management aims to:
• Leverage Gen AI across credit and risk workflows.
• Use alternative data (e.g., climate, property, ESG) to keep its datasets central as decision‑making gets more granular and real time.

Key success factors over this horizon:

• MA ARR growth and SaaS mix: Sustained double‑digit ARR growth with expanding SaaS penetration would show Moody’s is truly shifting from cyclical transaction revenue to durable, subscription‑heavy income.
• AI integration and client adoption: Clear, cited examples of Moody’s AI tools being embedded in major bank, insurer, or asset‑manager workflows would counter the narrative that AI‑native startups own the future.
• Regulatory stability: If regulators continue to rely heavily on NRSRO ratings within capital rules—despite increased oversight—Moody’s moat remains largely intact.

On the flip side, long‑term thesis breakers include:

• A structural reduction in NRSRO reliance in regulations.
• Persistent share loss to AI‑native risk platforms and open‑banking scores, visible in stagnating MA ARR and MIS growth even in favorable cycles.

Medium-term (6–18 months): execution and cycle watch

Over the next 6–18 months, the key indicators we’d focus on are:

MA ARR growth and margins

• Is ARR still growing high single digits to low double digits?
• Is the SaaS mix increasing while margins hold around low‑30s?

Restructuring and integration impacts

• Moody’s is running a Strategic and Operational Efficiency Restructuring Program (launched December 2024) and has integrated multiple acquisitions (RMS, GCR, Praedicat, CAPE, ICR Chile).
• We’ll be looking for proof that these moves translate into sustainably higher margins without harming franchise quality or culture.

Credit cycle indicators

• Slightly weakening credit quality in leveraged loans and office CRE could spur surveillance work but might also cap riskier issuance.
• The balance between surveillance fees and new issuance will be key for MIS.

Given the stock’s modest ~8% 12‑month gain from an already rich base, we think earnings delivery—not multiple expansion—is likely to drive future returns in this window. That puts more pressure on execution.

Balance sheet, capital allocation, and downside resilience

One reason investors are comfortable paying up for Moody’s is its balance of strong cash flows and manageable leverage.

Free cash flow and leverage

From the 10-K, Q3 2025 10-Q, and FMP metrics:

• Free cash flow:
• Around $2.52 billion in 2024.
• Quarterly FCF over the last few years has consistently been in the hundreds of millions, even through weaker issuance periods.

• Balance sheet and coverage:
• Net debt/EBITDA ~1.6x.
• Interest coverage ~16x.
• Cash and short‑term investments at $2.3 billion vs $7.2 billion in debt as of September 30, 2025.

That leaves Moody’s plenty of room to weather cyclical dips, invest in acquisitions, and continue shareholder returns.

Capital allocation and management quality

Management’s track record, as summarized in the 10-K and DEF 14A, looks broadly shareholder‑friendly:

Leadership continuity

• CEO Robert Fauber is a long‑time insider with deep MIS experience.
• In 2024, Noémie Heuland took over as CFO, with the prior CFO reassuming accounting and controller roles.

Shareholder returns

• In 2024, the company repurchased about 2.9 million shares, and had $1.57 billion remaining under the repurchase authorization at year‑end.
• Regular dividends complement buybacks, funded by robust FCF.

Strategic M&A

• Acquisitions like RMS, Praedicat, CAPE Analytics, GCR, and ICR Chile are tightly aligned with enhancing risk, climate, property, and regional analytics capabilities.
• These moves extend Moody’s dataset and distribution rather than diversifying into unrelated areas.

The main caution flag we see is the recurrence of restructuring programs (e.g., 2022–23 geolocation initiatives, 2024–26 strategic efficiency program). While these can be value‑enhancing, they also introduce execution risk and potential cultural strain if overused.

Still, combined with Berkshire’s enduring stake, we view Moody’s management and capital allocation as an overall positive part of the thesis—just not enough on their own to justify ignoring valuation.

Key risks to monitor before buying or trimming

We’re watching four risk clusters that could meaningfully shift the risk/reward:

1. Cyclical issuance risk

• If global bond and loan issuance weakens meaningfully, MIS revenue and margins will likely compress quickly.
• The 2022 revenue slump, highlighted in Macrotrends and the 10-K, is a recent reminder.
• If earnings roll over while the multiple stays elevated, we’d lean more firmly toward “Sell/Trim.”

2. Regulatory and legal risk

• Dodd–Frank and related regulations empower the SEC OCR to sanction NRSROs for failures; the 2024 e‑communications enforcement case shows authorities are prepared to act.
• A serious enforcement action, governance scandal, or change that weakens the NRSRO regime could hit both earnings and the moat simultaneously.

3. AI competition and technological substitution

• Real‑time AI platforms (Martini.ai, Plaid’s LendScore) and AI‑enhanced incumbents (like Experian) could gradually take share in risk workflows.
• If we see MA ARR stagnate and MIS growth lag the issuance cycle while these new tools gain adoption, we’d interpret that as moat erosion.

4. Credit quality and macro risk

• With about 39% of revenue and 49% of assets outside the U.S., Moody’s is exposed to FX and geopolitical risk.
• Slight weakening in credit quality among large borrowers, such as those owing over $100 million, may increase surveillance work but could also stress certain issuance markets.

From our perspective, the current price assumes none of these risks meaningfully break against Moody’s over the next several years. That’s possible—but not the odds we prefer when committing fresh value‑oriented capital.

How we’d approach Moody’s from here

Putting it all together, our stance is:

• Business quality: Exceptional. Entrenched oligopoly, high margins, strong cash generation, growing analytics and SaaS footprint, and capable management.

• Valuation: Demanding. Trading roughly 171% above a conservative FCF‑based DCF reference, with high multiples that leave little room for cyclical or structural disappointments.

Risk/reward for existing holders:

• If you’ve owned Moody’s for a long time, your cost basis is likely far below current levels. In that scenario, we’d consider:
• Trimming on strength to manage position size and valuation risk.
• Holding a core stake if you believe in long‑term compounding and are comfortable with drawdowns through the next issuance downturn.
• We’d be particularly valuation‑disciplined about adding at current prices.

Risk/reward for prospective buyers:

• We’d be inclined to wait for either:
• A material pullback driven by a normal cycle downturn, or
• Clear evidence that MA’s recurring SaaS and analytics mix has grown enough to justify structurally higher multiples than history.

This is exactly the type of stock where process and discipline matter: a phenomenal business whose shares can still be a poor investment if bought at the wrong price.

Sources

• Moody’s 10-K (2025)
• Moody’s 10-Q (Q3 2025)
• Moody’s 8-K (2025)
• Moody’s 11-K (2025)
• Moody’s DEF 14A (2025)
• Moody’s Corporation – Wikipedia
• Credit rating agency – Wikipedia
• Provisions of the Dodd–Frank Act on credit rating agencies – Wikipedia
• Macrotrends – Moody’s revenue history
• Macrotrends – Moody’s free cash flow history
• MarketsMedia – Moody’s acquires stake in alternative data provider MioTech
• PYMNTS – SEC says 6 credit rating agencies failed to preserve electronic communications (Sept 2024)
• PYMNTS – Martini puts real-time AI corporate credit risk model in everyone’s hand (Aug 2025)
• PYMNTS – Plaid introduces credit risk score based on real-time cash-flow data (Oct 2025)
• PYMNTS – Experian unveils new AI tool for managing credit risk models (Aug 2025)
• PYMNTS – Credit quality weakens slightly among borrowers owing over 100 million dollars (Mar 2025)