S&P Global: The Unbreakable Brand in Financial Information
S&P Global is a leading provider of financial information, analytics, and credit ratings.
The company is well-known for managing important indices like the Dow Jones and S&P 500, which are used by investors and institutions worldwide to track market movements.
As one of the Big Three credit rating agencies, alongside Moody’s and Fitch, S&P Global plays a critical role in helping investors rate fixed income and credit assets, providing a reference for risk measurements.
In addition to its credit ratings and index management services, S&P Global also provides a wealth of financial data and information, similar to the Bloomberg terminal.
Thanks to its knowledge-based and asset-light business model, S&P Global has been able to maintain impressive financial metrics, including a profit margin of 29% and a return on equity of 17% in FY2022.
Where money is made
S&P Global is divided into 6 business segments with Market Intelligence and Mobility being the financial data and information businesses. Together, these two segments contributed 44.29% of S&P Global's total revenue.
The credit rating business is housed under the Standard & Poor Global Ratings segment, which contributed about 27% of S&P Global's revenue.
The Commodity Insights and S&P Dow Jones Indices segments are indexing businesses with different focus areas. When combined, these two segments accounted for 27.05% of S&P Global's revenue.
While Engineering Solutions is the smallest segment, it is still a meaningful part of the company's operations.
Competitive Advantages
Strong index brand
Indexing businesses are highly lucrative due to the fact that once an index is created, it can generate an endless stream of income with minimal costs of recalculation. Indexers earn money by collecting royalties whenever an institution publishes their indices, and take a cut of the management fees when ETFs track their indices. As demand for ETFs continues to grow, indexers are making more money than ever before, which is a great tailwind for their businesses. Additionally, indexing is highly scalable, as the same index can be used no matter if billions or trillions of dollars are being tracked.