SPGI Stock: Why S&P Global’s Quant Rating Fell to an E

S&P Global’s quant rating just fell to an E, the lowest grade the system hands out, down from a C, at the same time its trailing P/E dropped to 24.7 from a five-year average of 39.2. Something got a lot cheaper here, and the quarter behind it wasn’t obviously bad enough to justify that on its own.

The stock trades around $405.32 as I write this, 21.9% below its 52-week high of $519 and 13% above its low of $358. On price-to-sales it now sits at 7.4 versus a five-year average of 11.1, and on price-to-book at 3.8 against a five-year average of 11.4. Every valuation yardstick I have for this stock says the same thing right now: cheaper than its own history, across the board.

My thesis: that compression is mostly rational rather than a market mistake, because forward earnings are effectively flat against trailing ($16.27 forward versus $16.43 trailing, an implied change of -1%) even though the trailing quarter still looked clean, and a stock rarely keeps a premium growth multiple once its own forward number stops confirming growth.

A duopoly that still sets the price

S&P Global and Moody’s together rate most global bond issuance, and that moat is built by regulation rather than by skill. Bank capital rules and many institutional mandates name their ratings specifically, so a rating from a smaller entrant is close to unusable for the buyers who actually set prices. Every bond sale sends a fee to one or both of them. That’s the moat. I’ve drawn a similar two-company, one-industry comparison for Nvidia and AMD, where the pricing power comes less from any single quarter’s numbers than from how few real alternatives buyers have. That structure hasn’t changed since S&P Global’s big acquisition, and it’s still the reason this stock carries a premium multiple at all, even a compressed one.

The analyst spread around that multiple is worth a look too. Seventeen analysts publish a target on this stock, and the low end of that range is $500, still 23% above today’s price; the high end is $553, implying 36%. Every single one of them rates the stock a buy. That’s a narrower, more one-sided spread than you’d expect from a name whose own quant score just cratered, and it tells me the professional sell side hasn’t yet updated its model for whatever the quant system is picking up.

What the IHS Markit merger actually added

S&P Global agreed to buy IHS Markit in an all-stock deal that valued the target near $44 billion including debt, and the merger closed on February 28, 2022, as S&P Global announced at the time. Ratings revenue moves with bond issuance, which is lumpy by nature; a slow quarter for corporate debt sales is a slow quarter for this segment, full stop. IHS Markit brought a much larger, stickier base of subscription data across commodities, automotive forecasting and financial-market analytics that doesn’t depend on how many companies decide to sell bonds in a given quarter. Rate moves matter here too, since issuance volume tends to swing with the cost of borrowing, and a business mix that leans harder on subscriptions is the one part of this company that a rate-cut cycle can’t easily derail.

The deal was unpopular when it closed. Ratings agencies were supposed to be simple, high-margin businesses, and here was S&P Global spending years folding in a sprawling data company with a completely different sales motion, different customers and a much longer integration timeline than a typical bolt-on acquisition. Cost savings and cross-selling took years to show up in a way skeptics could actually see, rather than just take management’s word for, and that patience gap is a large part of why the stock traded at a much richer multiple in the years right after the announcement than it does now. What looks like compression today may partly be the market finally getting proof instead of a promise, and pricing the promise back out of the multiple now that it has been delivered.

Margins that kept expanding anyway

Gross margin rose to 70.2% from 69.1% a year earlier, and net income grew to $4.8 billion from $4.2 billion, an increase of about 14%. Revenue reached $15.3 billion, 8% higher than the $14.2 billion booked the year before, while the latest quarter came in at $4.1 billion, up 10% year over year but down 1% sequentially. Annualizing that quarter puts revenue on pace for $16.6 billion, below the $15.3 billion already booked over the trailing twelve months, which is the one number in this section that argues against my own optimism: growth is decelerating from the run rate rather than accelerating into it. I found a similar quiet-margin story at Netflix once the subscriber-count obsession faded and operating margin became the number that actually explained the stock; S&P Global’s version of that shift is the data-and-subscription share of revenue growing relative to transactional ratings, a mix change that shows up in the margin line before it shows up anywhere else. S&P Global’s financials page has the quarter-by-quarter detail.

Dividend investors are along for a smaller ride here too: the trailing payout is $3.86 per share, a yield of 0.95%, low enough that it confirms this is still priced and run as a growth-and-buyback story rather than an income one, even with the quant score where it is.

Question worth sitting with: is the market pricing a permanently slower ratings business, or just a slower few quarters? The distinction matters more than it sounds. A permanently slower ratings business changes the fair multiple for the whole company, subscription segment included, since it means the cyclical half of the business has a lower ceiling than investors assumed for most of the last decade. A slower few quarters is just noise that a stronger issuance calendar tends to clear up on its own. I lean toward the second read, mostly because the subscription and data segment keeps growing regardless of what ratings revenue does, which is exactly the diversification the IHS Markit deal was supposed to buy.

The forward number that does not fit

Here’s the part that keeps me from calling this simple. Forward EPS is guided implicitly to $16.27, against $16.43 trailing, an implied change of -1%. A company supposedly getting steadier shouldn’t have consensus estimates showing next year’s earnings roughly flat with this year’s, not right after margins expanded and net income grew double digits. Either the estimate is conservative, built on an assumption that issuance volumes cool off from here, or the quant system’s four-notch slide is picking up something in valuation or estimate revisions that the income statement hasn’t shown yet. I read it as the latter, a market getting more cautious about the multiple even while the trailing results still look clean.

The honest uncertainty is why the quant score fell that far, from a C to the lowest grade in the system, in a quarter that doesn’t read like a disaster in the numbers I have. I can’t fully explain a four-notch drop with this pack alone, and I’d want to see the next quarter’s revisions before treating the grade as gospel.

The risk to my caution: if bond issuance simply reaccelerates next quarter, unrelated to anything structural, ratings revenue snaps back and forward estimates get revised up.

That would mean this multiple compression was a temporary wobble rather than the market correctly pricing a slower few years. Issuance is famously hard to forecast even one quarter out, so that’s a real possibility, not a hedge for its own sake.

There’s a simpler explanation too, and I’d be dishonest not to mention it: quant grades built mostly from trailing valuation ratios can swing hard on a multiple move alone, with no change in the underlying business at all. A stock that goes from trading at 39 times trailing earnings to 25 times, on flattish forward estimates, will often trip several valuation-factor thresholds in one step even if nothing about the company changed that quarter. I don’t think that fully explains a drop to the bottom grade, since a couple of the growth and revisions factors should have held up better than they apparently did, but it’s a real part of the story and worth weighing against the more dramatic read.

Metric	Value	Context
Price	$405.32	21.9% below 52-week high of $519
P/E, trailing	24.7	five-year average 39.2
P/E, forward	24.9	implies -1% EPS growth
Price-to-sales	7.4	five-year average 11.1
Gross margin	70.2%	up from 69.1% a year earlier
Net income, trailing year	$4.8 billion	up from $4.2 billion
Quant rating	E	down from C
Analyst target (avg)	$523	29% above current price, 17 analysts, all buy

The report that would settle this

S&P Global last reported on 2026-07-28, when the stock moved -3.5% against an average expected swing of 4.5%, a smaller move than the swing implies but still a decline on the print. The next report is the one I’d use to settle this. If data-and-subscription revenue keeps growing faster than transactional ratings revenue, and gross margin holds above 70.2%, I’d treat the quant downgrade as noise and the 29% of analyst upside as more credible than the stock’s compressed multiple currently suggests. If issuance-driven ratings revenue instead slows enough to pull margin back toward the 69.1% area, that’s the concrete sign this multiple, 24.8 times trailing against a five-year average of 39.2, has further room to fall before it’s actually cheap rather than just cheaper than it was.

Analysis and opinion only, not investment advice. Figures on price, margins, revenue and analyst targets come from S&P Global’s filings on SEC EDGAR; the IHS Markit merger terms and closing date come from S&P Global’s own announcement, and valuation multiples are approximate, checked on September 23, 2026.

Sources: Dividends (SEC Investor.gov glossary) (https://www.investor.gov/introduction-investing/investing-basics/glossary/dividend) · Dividends tax topic (IRS) (https://www.irs.gov/taxtopics/tc404)