As of July 25, 2023, MSCI Inc (MSCI, Financial) recorded a positive day's change of 6.34%, with a stock price of $534.64. The company's market cap stands at $42.8 billion, and it boasts an Earnings Per Share (EPS) of $10.91. According to GuruFocus.com's unique GF Value indicator, MSCI (MSCI) is fairly valued, with a GF Value of $587.9.
MSCI's mission is to empower investors to build superior portfolios for a better world. Its primary segment, the index segment, provides benchmarking to asset managers and asset owners. MSCI also has over $1 trillion in ETF assets linked to its indexes. The company's analytics segment offers portfolio and risk management analytics software. In 2021, MSCI expanded its operations to include ESG and climate and private assets segments.
Assessing MSCI's Fair Value
The GF Value is a proprietary indicator that GuruFocus uses to determine a stock's intrinsic value. It considers historical trading multiples, an adjustment factor based on past performance and growth, and estimates of future business performance. When a stock's price is significantly above the GF Value Line, it could be overvalued, indicating potentially poor future returns. Conversely, if it's significantly below the GF Value Line, the stock may be undervalued and likely to yield high future returns. Currently, MSCI's stock price aligns closely with its GF Value, suggesting that it is fairly valued.
Given this fair valuation, the long-term return of MSCI's stock is likely to align with the rate of its business growth.
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Financial Strength of MSCI
Before investing in a company, it's crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are excellent indicators of a company's financial strength. MSCI's cash-to-debt ratio of 0.23 is lower than 83.68% of companies in the Capital Markets industry. Its overall financial strength is rated 5 out of 10, indicating fair financial health.
Profitability of MSCI
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. MSCI has been profitable for the past ten years. Over the past twelve months, the company had a revenue of $2.3 billion and Earnings Per Share (EPS) of $10.91. Its operating margin of 54.07% ranks better than 85.78% of companies in the Capital Markets industry, indicating strong profitability.
Growth Prospects of MSCI
Growth is a vital factor in a company's valuation. MSCI's 3-year average annual revenue growth rate is 15%, which ranks better than 64.51% of companies in the Capital Markets industry. Its 3-year average EBITDA growth rate is 18.8%, outperforming 61.26% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC) offers another perspective on its profitability. MSCI’s ROIC of 23.87 for the past 12 months is higher than its WACC of 11.31, indicating efficient capital usage.
Conclusion
In conclusion, MSCI Inc (MSCI, Financial) appears to be fairly valued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 61.26% of companies in the Capital Markets industry. To learn more about MSCI stock, you can check out its 30-Year Financials here.
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