Morningstar, Inc. (MORN) Stock Analysis and Metrics

Sector: Financial Services Industry: Financial Data & Stock Exchanges CIK: 0001289419

Market Cap 9.15 Bn

P/B 6.04

P/E 24.34

P/S 3.82

ROIC (Qtr) 15.31

Div Yield % 1.06

Rev 1y % (Qtr) 8.43

Total Debt (Qtr) 1.04 Bn

Debt/Equity (Qtr) 0.69

About

Morningstar, Inc., a leading global provider of independent investment insights, is on a mission to empower investor success. Established in 1984, the company has grown its footprint in worldwide markets, offering a variety of products and solutions for both individual and institutional investors. Morningstar's business pillars include supporting individuals, financial advisors, wealth managers, and institutions that make their own investment decisions; providing investment management services, advisor tools, and platforms; and offering credit ratings...

Morningstar, Inc., a leading global provider of independent investment insights, is on a mission to empower investor success. Established in 1984, the company has grown its footprint in worldwide markets, offering a variety of products and solutions for both individual and institutional investors. Morningstar's business pillars include supporting individuals, financial advisors, wealth managers, and institutions that make their own investment decisions; providing investment management services, advisor tools, and platforms; and offering credit ratings and research.

Morningstar offers a range of primary products and services such as Morningstar Data and Analytics, PitchBook, Morningstar Wealth, Morningstar Credit, and Morningstar Retirement. Morningstar Data and Analytics provides investors with comprehensive data, research, and insights for empowered investment decision-making. This segment includes various offerings such as Morningstar Data, Morningstar Direct, Morningstar Advisor Workstation, and Morningstar Research Distribution.

Another significant product is PitchBook, a platform that offers a wide array of data and research on private capital markets, including venture capital, private equity, private credit, and mergers and acquisitions activities. PitchBook caters to investment and research professionals, including venture capital and private equity firms, corporate development teams, investment banks, limited partners, lenders, law firms, and accounting firms.

Morningstar Wealth offers a variety of products and services tailored to empower both advisors and investors for success. This segment includes Investment Management, which comprises model portfolios and wealth platforms, practice and portfolio management software for registered investment advisers, data aggregation and enrichment capabilities, and individual investor platforms.

Morningstar Credit, as the world's fourth-largest credit rating agency, provides global credit ratings for financial institutions, corporate and sovereign entities, structured finance products, and instruments. Morningstar Retirement helps retirement plan sponsors and retirement specialist advisors build high-quality savings programs for employees by offering a range of products and services designed to meet the needs of their employees.

Morningstar's competitive advantages include its investor-centric focus, utilization of design and technology for conveying complex financial information, and global presence. The company's products and services cater to a wide assortment of market participants, such as individual and institutional investors, financial advisors and wealth managers, asset managers, retirement plan sponsors, and fixed-income securities issuers.

Morningstar's clientele encompasses a broad spectrum of institutions and individuals, including Fidelity, Charles Schwab, Vanguard, BlackRock, and State Street Global Advisors, among others. The company's products and services are utilized by financial advisors and wealth managers, such as Raymond James, LPL Financial, and Ameriprise Financial.

Regarding its position in the industry, Morningstar is a leading provider of independent investment insights and data, with a global presence and a wide range of products and services. The company competes with other prominent industry players, including Bloomberg, FactSet, and Refinitiv.

Morningstar's strategy revolves around providing insights and experiences that make it indispensable to investor workflow. The company prioritizes four connected elements: its values, its work, its clients, and its brand. Morningstar is dedicated to cultivating a culture that develops talent, fosters innovation, and encourages an inclusive environment that promotes open dialogue, creativity, and innovation.

In terms of its people and culture, Morningstar boasts a diverse workforce of 11,334 permanent, full-time employees worldwide. The company is committed to creating an environment where the people driving its mission are valued, heard, and rewarded. Morningstar's diversity, equity, and inclusion initiatives are managed by the chief people officer and implemented with support from leaders throughout the company.

Price action

Investment thesis

Bull case

Strong operating cash flow of 539.10M provides robust 0.52x coverage of total debt 1.04B, indicating excellent debt servicing capability and financial flexibility.
Healthy cash reserves of 474.20M provide 11.88x coverage of short-term debt 39.90M, demonstrating strong liquidity position and minimal refinancing risk.
Operating cash flow of 539.10M provides exceptional 20.12x coverage of interest expenses 26.80M, showing strong debt service capability.
Robust free cash flow of 394.10M exceeds capital expenditure of 145M by 2.72x, indicating strong organic growth funding capability.
Cash reserves of 474.20M provide ample 21.26x coverage of acquisition spending 22.30M, enabling strategic growth opportunities.

Bear case

Operating cash flow of 539.10M barely covers its investment activities of (103.50M), with a coverage ratio of -5.21, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
Operating cash flow of 539.10M provides thin coverage of dividend payments of (75.30M) with a -7.16 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
Operating cash flow of 539.10M provides insufficient coverage of deferred revenue obligations of 584.90M, which is 0.92x, raising concerns about future service delivery capabilities.
Operating earnings of 521.80M show weak coverage of depreciation charges of 191.20M, with a 2.73 ratio indicating high capital intensity and potential reinvestment needs.
Free cash flow of 394.10M represents just -24.18x of debt issuance (16.30M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Financial Data & Stock Exchanges

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	SPGI	S&P Global Inc.	157.13 Bn	37.25	10.47	11.87 Bn
2	CME	Cme Group Inc.	96.82 Bn	26.05	15.13	152.46 Bn
3	ICE	Intercontinental Exchange, Inc.	91.82 Bn	29.04	7.33	19.51 Bn
4	MCO	Moodys Corp /De/	90.39 Bn	40.28	12.05	7.36 Bn
5	COIN	Coinbase Global, Inc.	62.10 Bn	19.30	8.10	7.59 Bn
6	NDAQ	Nasdaq, Inc.	54.56 Bn	33.58	6.68	9.55 Bn
7	MSCI	MSCI Inc.	43.97 Bn	35.94	14.39	5.62 Bn
8	CBOE	Cboe Global Markets, Inc.	25.92 Bn	26.50	5.61	1.57 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	2.72	2.79
EV to Cash from Ops. EV/CFO	17.96	33.08
EV to Debt EV to Debt	9.29	17.54
EV to EBIT EV/EBIT	18.56	18.27
EV to EBITDA EV/EBITDA	13.33	20.66
EV to Free Cash Flow [EV/FCF] EV/FCF	24.57	-39.00
EV to Market Cap EV to Market Cap	1.06	1.08
EV to Revenue EV/Rev	4.04	29.85
Price to Book Value [P/B] P/B	6.04	-0.11
Price to Earnings [P/E] P/E	24.34	23.23

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	4.99	2.12
Dividend Payout Ratio % Div Payout % (Qtr)	20.00	32.37
Dividend per Basic Share Div per Share (Qtr)	1.82	2.63
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	19.44	26.82
Interest Coverage Int. cover (Qtr)	19.47	8.16

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	-9.77	-11.26
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	-14.23	21.19
Dividend Growth (1y) % Div 1y % (Qtr)	12.35	1.08
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	10.08	10.39
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	21.17	15.05
EBIT Growth (1y) % EBIT 1y % (Qtr)	15.21	17.06
EBT Growth (1y) % EBT 1y % (Qtr)	20.53	21.11
EPS Growth (1y) % EPS 1y % (Qtr)	16.14	31.00
FCF Growth (1y) % FCF 1y % (Qtr)	-11.22	30.56
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	7.80	13.67

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	0.67	0.61
Cash Payout Ratio Cash Payout (Qtr)	0.11	0.24
Cash Ratio Cash Ratio (Qtr)	0.50	0.51
Current Ratio Curr Ratio (Qtr)	1.04	1.97
Debt to Equity Ratio Debt/Equity (Qtr)	0.69	0.56
Interest Cover Ratio Int Coverage (Qtr)	19.47	8.16
Times Interest Earned Times Interest Earned (Qtr)	19.47	8.16

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	29.80	-985.15
EBIT Margin % EBIT Margin % (Qtr)	21.78	-991.90
EBT Margin % EBT Margin % (Qtr)	20.66	-1,071.07
Gross Margin % Gross Margin % (Qtr)	60.90	72.61
Net Profit Margin % Net Margin % (Qtr)	15.70	-1,440.85

Morningstar, Inc. (NASDAQ: MORN)

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Price action

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Bull case

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