Mr. Bigglesworth

Moody's: Expecting Further Share Price Erosion

Might have been a nice call before it dropped 50%. Closing the barn door after the horse has left. YTD MCO has outperformed the major indices and crushed the financial sector. ozaib.notlong.com

The company is extremely profitable with high returns on capital, and generates a ton of cash, and now it is on sale at a 14-15x PE, and 8x EV/EVITDA? You want to buy when others are fearful and sell when others are greedy. Selling MCO when all the bad news is baked in is just amateur hour momentum trading. No doubt these are the same “analysts” telling us to buy Pets.com at the IPO.

The ratings agencies are way out ahead of the regulators and legislators and have proposed changes which will mollify Washington while not denting their 50%+ operating margins. The company has traded at an average PE multiple of 26x over the last eight years. Even with lower volumes from less securitizations, the business model is extremely attractive and will get a higher multiple once the dust settles. Couple that with growing foreign and analytics business, and a compelling price and, if you have a time horizon longer than next week, this is a BUY, not a SELL.