McGraw-Hill Companies Inc.MHP

Morningstar Rating

Stock Research and Analysis

by Bill Bergman

McGraw-Hill's origins date back to the late 1800s, when founders James McGraw and John Hill were publishing a variety of industrial trade publications. Today, McGraw-Hill's branded information services include the likes of Standard & Poor's, Business Read more

Bulls Say

The credit-ratings companies are so well-entrenched in capital markets that they will not see any significant disruption to their business from the recent structured-finance meltdown. Regulatory changes are likely to be incremental like they have been in the past.

Regulations require most debt products to obtain two independent ratings, and both debt issuers and investors want to use as few rating agencies as possible. Debt issuers want to limit their time spent with credit analysts, and investors favor fewer voices to many.

McGraw-Hill has invested heavily in technology to become a key player in technology-based education, an emerging market in the education industry.

The company has a long record of returning capital to shareholders through dividends and share repurchases. Read more

Bears Say

The accuracy of the company's ratings in structured finance markets has come under fire. The S&P brand is important in winning new business, and missteps tarnishing that image limit the company's growth potential.

If the Securities and Exchange Commission (or any foreign equivalent) increases the regulation placed on S&P's credit-rating business, or otherwise fundamentally alters the credit rating regulatory framework, the company's profit margins may suffer.

McGraw-Hill has had a mixed record in its trade and other publication businesses in dealing with the new environment that technological change has delivered. Read more

Strategy

McGraw-Hill gathers, analyzes, and redistributes information for customers in financial services, education, and business trades. The company has historically leveraged high margins and cash flow from Read more

Management

We think the company's corporate governance could be improved. Harold McGraw III serves as CEO and chairman, which lowers our Stewardship Grade. More fundamentally, we think the level and structure of senior executive compensation in the 2004-08 interval Read more

Profile

McGraw-Hill is an information services company. The financial services division, which has generated about two thirds of the company's operating profit, offers ratings and Read more

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