McGraw Hill Financial is the leading provider of ratings, benchmarks and analytics in the global capital and commodity markets. In fact, most of the information that most investors rely on is compiled and presented each day by the companies of McGraw Hill Financial. This company is truly integral to investors at all levels.
But this company has been in the process of expanding, contracting and reinventing itself for decades. As a potential investor in this company it's difficult to base my investing decision strictly on the fundamentals. I'll need to rely on analyst's estimates going forward and the technicals as illustrated in the daily and weekly charts.
- As restructuring comes to a temporary end it appears that the fundamentals of the company are getting back on track.
- The company has recently sold off its educational division and is now a pure financial reporting and analysis corporation.
- A one year total return of 10.22% and a 3 year dividend growth rate of 5.95% is nice but not exceptional.
McGraw Hill Financial, Inc. (MHFI), a financial intelligence company, provides credit ratings, benchmarks, and analytics to capital and commodity markets worldwide. The company’s operations consist of four segments: Standard & Poor’s Ratings (S&P Ratings), S&P Capital IQ, S&P Dow Jones Indices (S&P DJ Indices), and Commodities & Commercial (C&C). The S&P Ratings segment offers credit ratings for investors, corporations, governments, municipalities, commercial and investment banks, insurance companies, asset managers, and other debt issuers. The S&P Capital IQ segment provides digital and traditional financial research and analytical tools, which integrate cross-asset analytics, desktop services, and investment recommendations. It serves asset managers, investment banks, investors, brokers, financial advisors, and investment sponsors, as well as companies’ back-office functions, including compliance, operations, risk, clearance, and settlement. The S&P DJ Indices segment maintains various valuation and index benchmarks for investment advisors, wealth managers, and institutional investors. The C&C segment offers information, data, analytic services, and pricing benchmarks for producers, traders, and intermediaries in energy, metals, and agriculture markets, as well as professionals and executives in automotive, construction, and marketing/research services markets. This segment consists of business to business companies that include brands, such as Platts, J.D. Power and Associates, and McGraw-Hill Construction. The company was formerly known as The McGraw-Hill Companies, Inc. and changed its name to McGraw Hill Financial, Inc. in May 2013 after the sale of McGraw-Hill Education to Apollo Global Management, LLC. McGraw Hill Financial, Inc. was founded in 1888 and is headquartered in New York, New York. (Daily Chart) (Weekly Chart)
18 May 2014
1yr Target $84.75
1yr Cap Gain 8.68%
1yr Tot Return 10.22%
3yr DGR 5.95%
5yr DGR 4.94%
Payout Ratio 22.81%
EPS (ttm) $3.27
EPS next yr $4.27
McGraw Hill Financial, Inc (MHFI), is a relatively difficult corporation to assess (for me) due to its organizational evolution over the years. Although MHFI started out as a small and simple publishing company it has evolved into a completely different organization today. Today MHFI's primary areas of business are financial, publishing, and business services, and it is the parent company of Standard & Poor's, Platts, J.D. Power and Associates, McGraw Hill Construction, and the majority owner of the S&P Dow Jones Indices joint venture.
In 1995 the McGraw-Hill Publishing Company, Inc, became The McGraw-Hill Companies as part of a corporate identity rebranding and re-identification campaign. Then in 2011 the company sold its entire television station group to E.W. Scrips for $212 Million and redirected the company back into the publishing business.
In another tactical change of direction the McGraw Hill Companies sold off its entire educational division to Apollo Global Management in 2012 for $2.5 Billion and exited the education business completely. As a result of this new corporate direction, the McGraw Hill Companies, in 2013, changed its name once again to McGraw Hill Financial Inc.
McGraw Hill Financial now organizes its businesses into four units, based upon the market they are involved in.
- Standard & Poor's provides independent investment research including ratings on various investment instruments.
- S&P Capital IQ is a leading provider of multi-asset class and real time data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities.
- S&P Dow Jones Indices is the world's largest global resource for index-based concepts, data, and research, it's home to the widely tracked S&P 500 and the Dow Jones Industrial Average, it calculates over 830,000 indices, publishes benchmarks that provide the basis for 575 ETFs, and serves as the DNA for $1.5 trillion of the world’s indexed assets.
- Commercial and Commodities Market which is made up of the following companies - J.D. Power and Associates, McGraw Hill Construction and Platts.
All of this has made it relatively difficult to sort through and understand the fundamentals of this evolving corporation from an investor's point of view.
Fortunately for investors, management has steadily maintained an increasing dividend annually throughout this entire process of reorganizing and rebranding the company. They've been able to do this by allowing the payout ratio to increase during periods of reduced earnings and then decreasing the payout ratio as earnings once again increased. This has maintained a dividend growth rate over the last few years in the 5%-7% range which is in excess of the inflation rate over this same period.
Revenue Growth Rates
3yr = 9.50% 5yr = -5.53% 10yr = -0.43%
Earnings Growth Rates
3yr = 31.32% 5yr = 14.36% 10yr = 10.61%
Dividend Growth Rates
3yr = 5.95% 5yr = 4.94% 10yr = 7.56%
Like most other stocks this year, MHFI is bouncing between it's Bollinger Bands but has basically gone sideways since the beginning of the year, similar to the overall market. As such, the short term trade for swing traders is between the Bollinger Bands at $72 and $82. For buy and hold investors, waiting for a pull back to the lower Bollinger Band before buying and realizing the best return available is probably the best strategy to implement. Finally, if I already owned the stock (which I don't) I'd be looking for the price to approach the upper Band and then sell covered calls against my position.
With the stock currently listed at approximately $78, the best decision for me at this time is to simply wait for a lower price before committing funds. When I do commit funds, I'll be entering into the trade with the idea of Buy, Write, Collect.