Moody's (MCO) — FAQ

Question 1

What is a reverse DCF analysis?

Accepted Answer

Reverse DCF solves for the annual growth rate implied by the current price, instead of assuming a growth rate to compute fair value. This page runs the model on trailing EPS and on free cash flow per share — both views appear below so you can compare what the market implies under each.

Question 2

What EPS growth is priced into MCO?

Accepted Answer

On the EPS basis, the model implies about 16.5% annual EPS growth for Moody's (MCO) at the current price. Compare to the 5-year historical EPS CAGR of 7.8%.

Question 3

What FCF / share growth is priced into MCO?

Accepted Answer

On the FCF / share basis, the model implies about 32.9% annual free-cash-flow-per-share growth for Moody's (MCO) at the current price. Compare to the 3-year historical FCF-per-share CAGR of 9.6%.

Question 4

Should I use EPS basis or FCF / share basis?

Accepted Answer

EPS basis is the textbook reverse-DCF input — broadly comparable across companies and easy to relate to next-year analyst consensus — but it is distorted by non-cash items like stock-based compensation and large depreciation. FCF / share is closer to the cash actually available to shareholders after capex; it tends to give a cleaner picture for mature cash-generative businesses, but it is more volatile during heavy-capex years and analyst consensus is not available for it. Most premium DCF tools recommend cross-checking both.

Question 5

What is MCO's fair value based on historical growth?

Accepted Answer

If Moody's (MCO) grew at its historical per-share CAGR in the DCF setup, the model produces the following fair values. Using the historical EPS CAGR, fair value lands at about $264.64 — 46.0% below the current price. Using the historical FCF-per-share CAGR, fair value lands at about $94.78 — 80.6% below the current price.

Question 6

Is MCO overvalued or undervalued?

Accepted Answer

Compare the implied per-share growth on each basis to the corresponding historical CAGR and, for EPS, to analyst consensus. A reverse DCF is one educational lens — it does not account for changes in capital structure, sector cycles, or business-model transitions, and it is not investment advice.

Method	Fair value	Upside vs price
Forward DCF	$264.64	-45.96%
Exit multiple	$562.29	+14.82%
Analyst target	$540.33	+10.34%
Graham number	$44.05	-91.01%

Row axis: discount rate. Column axis: terminal growth.Terminal g →↓ Discount	1.5%	2.0%	2.5%	3.0%	3.5%
9.3%	29.4%	28.7%	28.0%	27.1%	26.2%
10.3%	31.9%	31.2%	30.5%	29.8%	29.0%
11.3%	34.1%	33.6%	32.9%	32.3%	31.6%
12.3%	36.3%	35.8%	35.2%	34.7%	34.0%
13.3%	38.4%	37.9%	37.4%	36.9%	36.3%

Fair Value for Moody's (MCO)

Fair value (multi-method)

Valuation methods

Model inputs

Sensitivity — implied growth vs your assumptions

Historical multiples

Frequently asked questions

Moody's (MCO) Key Financials

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