Imagine walking into a library filled with books on every single company around the world. At your fingertips would be insights and data about how each company is run… its health… and its performance.

That’s exactly what my Stock of the Week provides.

It’s a leading data and analytics company that plays a crucial role in the global business landscape. It provides valuable insights and ratings about companies to investors, businesses and even governments.

Suffice it to say… this company plays a part in most investment deals. Its services will always be needed.

But the numbers make a compelling case for the company too.

It has paid a dividend since 1937 – it’s one of only 25 companies that can make that claim.

The stock is outperforming its peers with low volatility…

And the chart just made a bullish pattern.

I see an easy 40% gain from here.

Get all the details on the stock – including the ticker – in this week’s video.

Click on the image below to watch it.

Transcript

FIND WINNING STOCKS WITH CROCI

Hi Manward family, I’m Alpesh Patel. Welcome to my weekly Stock of the Week.

This is where my team go through a whole bunch of stocks and they put across my desk those companies looking interesting and worthy of putting before you. And this week I have got one which meets all those criteria.

The company is S&P Global (SPGI). So not S&P 500, S&P Global.

They are into credit ratings – and we’re certainly going to need a lot of that given what’s happening in the global economy – benchmarks, analytics, and what they call workflow solutions in the global capital, commodity and automotive markets.

And given global growth, given the number of companies which are going to need finance, given the boom in asset management generally (which uses some of these ratings to decide whether to lend to companies or not), this company’s services obviously are going to be continually in need.

It operates through six segments, some of which you might have heard of: S&P Global Ratings, S&P Dow Jones Indices, S&P Global Commodity Insights, S&P Global Market Intelligence, S&P Global Mobility and S&P Global Engineering Solutions.

It used to be part of McGraw-Hill, the massive publishing company, and then it was spun out from McGraw-Hill’s education businesses.

It’s got a market cap of, wait for it, $125 billion. Billion. Didn’t sound that big when I described it earlier on, did it?

The stock price has gained about 40% over the past year or so. It’s been outperforming its peers.

It pays dividends, which it’s been doing since 1937, which makes it pretty rare. It’s one of only 25 companies in the S&P 500 that’s been able to continuously pay dividends over that period.

So what was it about the financials which got me interested?

Well, first and foremost, as my team will know, and as you’ll know if you’ve been following me, my Growth-Value-Income rating. That’s my proprietary algorithm, which measures for the valuation of a company, its share price relative to profitability and revenue growth, dividend yields, cash flow, momentum, all of these factors, then scores them out of 10.

This company meets my minimum, so it’s a 7 or higher. In fact, it’s an 8.

I was also attracted by the CROCI, or cash return on capital invested, of 7.5%. Why that’s important you can find out right here. CROCI was invented by Deutsche Bank and is used by Goldman Sachs Wealth Management for its wealthiest clients.

The price has been moving steadily upward, so good momentum there. Sortino ratio, the measure of reward versus risk, is positive. It’s not as high as I’d like, but it’s okay. Volatility, 11.7% – below 20%, which is what I prefer it to be. And alpha… it’s outperforming the market.

Now, turnover is going in the right direction. I love it. Pretax profits are going in the right direction. Asset growth is good. What we’ve also got is forecast for turnover growth, forecast for profitability growth, all of these things… It’s ticking a heck of a lot of boxes.

There’s a slight issue with valuation. The forecast P/E ratio is at a multiple of 31. That means the current share price compared with the forecast profitability of the company is trading at a multiple of 31 – that’s a little bit expensive, so if you’re looking for some negatives, that would be one.

Certainly, it’s loved by Wall Street – virtually every bank and their mother wants to give it a “Buy” rating. But we don’t care so much about what Wall Street thinks; we care about what we think and have independent insight.

The upward trend, which began just a couple of months ago, looks in place. For those of you who are into technical analysis, it’s got an inverse head and shoulders pattern, which is very bullish as well. Anyway, I’ve done a projection for this one on the line and direction which I think it will go. I’m really looking for an all-time high – or rather, for it to beat its January 2022 highs – within the next 12 months, and that would give a pretty good return for the company.

In terms of return histograms, which is the statistical analysis I like to look at to see whether it could go a little bit to the negative side over 250 days, yeah, there’s some volatility. There is some downside risk, so we’ve got to be aware of that.

And on a discount cash flow basis, that valuation issue comes in again. Discounted cash flow doesn’t guarantee that it’s overvalued, but it looks, according to a discounted cash flow measure, somewhat overvalued.

Now, like I said, I’m willing to overrule that when there’s enough other things going in the right direction, which I’ve done over here. So that’s me overruling it.

Now, that’s the Stock of the Week. I hope you’ve had a happy Independence Day, and thank you very much for listening.

Thank you.