Moody’s Corporation (NYSE:MCO) sits behind one of the strongest moats in finance. Alongside S&P Global, it forms a near-duopoly that rates most of the world’s debt. At about $441 a share on October 2, 2026, and $76 billion in value, it trades near 28 times earnings, roughly 19% below its high. So here is what you are buying at this price: a bet that the ratings toll booth keeps collecting, and that debt keeps getting issued, enough to justify a compounder’s multiple.
The Toll-Booth Math
Moody’s earnings are primarily from two businesses. The first, Moody’s Investors Service, or Moody’s ratings, is the famous ratings arm, holding roughly 35% to 40% of the global market alongside S&P. Issuers essentially must get rated to sell debt, and Moody’s charges a fee on each deal. And about 68 cents of every dollar of ratings revenue are operating profit. Rated issuance recently topped $2 trillion in a single quarter, with significant contribution from the wave of AI-related borrowing. The issuers behind that borrowing are the AI builders themselves, and a few of them are still small enough to move fast. Here are 10 AI stocks that will skyrocket.
The second business, Moody’s Analytics, sells risk data and software, and it is almost entirely recurring, around 98% subscription revenue that keeps coming regardless of the debt cycle. So, at 28 times earnings, investors are underwriting two things: that the duopoly keeps its pricing power, and that issuance stays healthy enough to keep the high-margin ratings engine humming.
The Bull Case
Here is the case for the buyers. The ratings moat is genuinely rare. Regulation anoints only a handful of recognized rating agencies. Its duopoly partner is already reaching for the next frontier: S&P Global just moved into onchain finance.
Reputations built over a century are nearly impossible to copy, which offers Moody’s steady pricing power and elite margins. The Analytics arm, growing double digits and almost all recurring, cushions the swings in ratings and tilts the company toward subscriptions. And the long-term rise in global debt means more to rate over time.
The Bear Case
The bears, however, are skeptical. The ratings business rises and falls with how much debt companies issue, and issuance is sensitive to interest rates. If higher-for-longer rates slow borrowing, the highest-margin revenue takes the hit, making the 28x multiple look rich. Ratings also carry a political target, with recurring talk of regulation and litigation after past crises. Over time, AI and alternative credit data could chip at the analytics edge. At a premium multiple, a turn in the debt cycle or an adverse ruling could send the stock stumbling.
The Bottom Line
So weigh one question: can the recurring Analytics base and the duopoly’s pricing power smooth the swings in debt issuance enough to justify Moody’s Corporation’s (NYSE:MCO) 28 times? The bullish thesis centers on the moat and the rising recurring mix being the appeal, if issuance holds up. The bears argue that 28 times is reasonable only if you treat Moody’s as a steady compounder rather than a cyclical. An income investor gets only a small yield of 0.93%. The ratings duopoly may be the best moat in finance, yet the premium assumes the issuance machine keeps running.
Market Sentiment
According to Insider Monkey’s database, 100 hedge funds held Moody’s at the end of the second quarter of 2026, up from 95 the quarter before. The value of those combined holdings also rose, from about $22.3 billion to roughly $23.2 billion. Moody’s is a classic non-AI compounder, the kind value investors favor. See Seth Klarman’s new non-AI picks.
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This article is originally published at Insider Monkey.
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