MC

We rate Moelis & Co (MC) as a Reduce with a composite score of 49.5/100 at a current price of $62.40. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in quality (81th percentile) and value (58th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (28th percentile) and momentum (31th percentile) tempers our overall conviction. We assign a Narrow Moat rating (49/100), High uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Moelis & Co holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 49.5/100 places it at rank #2080 in our full 7,333-stock universe. At $5.6B in market capitalization, Moelis & Co is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 35%, though momentum at the 31th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 100% (+23.5pp vs sector) narrow to operating margins of 12% (-5.1pp vs sector) and net margins of 13.6%, yielding a gross-to-net conversion rate of 14%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $62.40, Moelis & Co is trading near fair value based on current fundamentals. Our value factor score of 58/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 26.0x (a 118% premium to the sector median of 11.9x), EV/EBITDA of 27.1x (at a premium), P/B of 7.6x, P/S of 3.6x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a High uncertainty rating to Moelis & Co. Key risk factors include elevated market sensitivity (beta of 1.46), significant leverage (145% debt-to-equity), below-average price stability (28th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.46); significant leverage (145% debt-to-equity); below-average price stability (28th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 28th percentile and quality factor at the 81th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 100% provide a buffer against cost pressures; a 3.58% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Moelis & Co's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 29.1%, and the balance sheet is managed within acceptable parameters (D/E: 145%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Moelis & Co falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 3.58% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Moelis & Co receives a Reduce rating with a composite score of 49.5/100 (rank #2080 of 7,333). Our quantitative framework assigns a Narrow Moat (49/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 48/100.

Our analysis does not support a constructive view on Moelis & Co at this time. The combination of the current quantitative profile, high uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.