Topic: Growth Stocks

MOODY’S CORP. $32 – New York symbol MCO

MOODY’S CORP. $32 (New York symbol MCO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 222.0 million; Market cap: $7.1 billion; Price-to-sales ratio: 3.2; Dividend yield: 2.0%; TSINetwork Rating: Average; provides credit ratings and other information on bonds and other securities. The company gets two-thirds of its revenue from credit ratings. The remaining third comes from its analytics businesses, which mainly sell credit-assessment software.

There have been fewer issues of speculative-grade bonds and bonds backed by mortgages due to concerns over high European debt levels. That has hurt demand for the company’s credit ratings.

That’s why Moody’s is continuing to expand beyond credit ratings. To that end, it recently bought a majority stake in Copal Partners, a private firm that sells research and other services to institutional investors. Moody’s did not say how much it paid, but Copal has about $50 million of annual revenue.

Meanwhile, the company’s revenue rose 3.5% in the third quarter of 2011, to $531.3 million from $513.5 million a year earlier. Without favourable exchange rates, revenue would have risen 1.0%. Earnings fell 3.9%, to $130.7 million from $136.0 million. Earnings per share fell 1.7%, to $0.57 from $0.58, on fewer shares outstanding.

The stock trades at a reasonable 12.7 times its likely 2011 earnings of $2.52 a share. It also trades at 12.1 times its forecast 2012 earnings of $2.64 a share.

Moody’s is a buy.


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