Moody’s Corporation (MCO): A Bull Case Theory

We came across a bullish thesis on Moody’s Corporation on Valueinvestorsclub.com by felton2. In this article, we will summarize the bulls’ thesis on MCO. Moody’s Corporation’s share was trading at $508.00 as of September 16th. MCO’s trailing and forward P/E were 43.20 and 32.89 respectively according to Yahoo Finance.

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Moody’s Corporation (MCO) remains a compelling investment despite being widely recognized as a high-quality business. The company operates through two segments: Moody’s Investor Services (MIS), which accounts for ~70% of EBITDA, and Moody’s Analytics (MA), contributing ~30%. MIS is the second-largest credit rating agency globally, operating in a highly concentrated industry where Moody’s and S&P Global control more than 80% market share.

With deep regulatory barriers and entrenched market positioning, MIS enjoys extraordinary pricing power and margins near 60%. Revenue is largely issuance-driven, yet history shows consistent growth, averaging ~6% CAGR over multi-year periods, with recent volatility from the pandemic and interest rate cycles. Meanwhile, MA’s subscription-based model, built through acquisitions like Bureau van Dijk, RDC, and RMS, delivers >95% recurring revenues and high-single-digit organic growth, balancing MIS’s cyclicality and offering significant margin upside from its current ~31%.

The long-term growth outlook for Moody’s is underpinned by steady issuance volume growth, annual price increases, and a powerful refinancing tailwind. Roughly $4.9 trillion of U.S. and EMEA corporate debt matures over the next four years, with a particularly heavy wall in 2028 skewed toward speculative-grade issuance, providing favorable mix benefits. Compounding price hikes further enhance earnings power, while advances in generative AI promise structural margin expansion. Private credit, often cited as a threat, is emerging as a growth driver, with Moody’s already winning mandates and monetizing portfolio-level analytics.

With EBITDA growth poised to compound in the low double digits and free cash flow per share in the mid-teens, consensus underestimates the durability of MCO’s runway. Even assuming modest multiple compression, upside exceeds 50% over two years, while downside is cushioned by the company’s entrenched duopoly, high cash generation, and history of opportunistic buybacks. Catalysts include 2Q25 earnings and potential rate cuts in 2H25.

Previously we covered a bullish thesis on Moody’s Corporation (MCO) by Business Model Mastery in February 2025, which highlighted the company’s dominant credit ratings business, resilient recurring revenues, and expanding analytics division. The company’s stock price has depreciated approximately by 2.17% since our coverage. This is because issuance activity faced cyclical headwinds. The thesis still stands as Moody’s entrenched duopoly and pricing power remain intact. felton2 shares an identical view but emphasizes refinancing tailwinds and private credit growth.