Moody's has been treading water for the past six months, recording a small return of 4.1% while holding steady at $456.72. The stock also fell short of the S&P 500’s 16.6% gain during that period.

Given the weaker price action, is now a good time to buy MCO? Or should investors expect a bumpy road ahead? Find out in our full research report, it’s free.

Why Are We Positive on Moody's?

Founded in 1900 during America's railroad boom when investors needed reliable information on bond risks, Moody's (NYSE: MCO) provides credit ratings, risk assessment tools, and analytical solutions that help organizations evaluate financial risks and make informed investment decisions.

1. Encouraging Short-Term Revenue Growth

Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. Moody’s annualized revenue growth of 11.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

2. EPS Surges Higher Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Moody’s EPS grew at a spectacular 21.3% compounded annual growth rate over the last two years, higher than its 11.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

3. Stellar ROE Showcases Lucrative Growth Opportunities

Return on equity (ROE) measures how effectively financial firms generate profit from each dollar of shareholder equity — a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Moody's has averaged an ROE of 59.9%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Moody's has a strong competitive moat.

Final Judgment

These are just a few reasons why we think Moody's is a high-quality business. With its shares lagging the market recently, the stock trades at 25.6× forward P/E (or $456.72 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

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