MORNINGSTAR, INC. (MORN): what the price assumes

In the published model solve dated 2026-Q2, anchored at $199.48, MORNINGSTAR, INC. (MORN) is priced for today's economics sustained for ~5.7 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/MORN

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 9.6% cost of equity; growth searched up to the 20% fee-earnings ceiling.

How unusual the bet is: high

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.

Per-Model Detail (n=17)

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

At $153.68 Morningstar trades around 30x earnings, which inverts into roughly 16% annual fee-earnings growth held for years. That sits at the very top of the fee-financial peer group, and the model reads the priced-in assumption as elevated rather than comfortable.

The business earns its premium on returns, not assets. Trailing return on equity runs near 39.5% on a thin book, and Q1 2026 grew operating and adjusted operating income more than 30% while shrinking the share count about 4%. This is a capital-light franchise compounding cash.

The two cautions are growth deceleration and leverage. The PitchBook and direct-data renewal rate slipped to about 103% from 108% as corporate and venture-capital demand softened, and net debt of roughly $1.2 billion sits at about 2.1x operating income with interest expense not separately disclosed.

Bull Case

The moat shows up first in the returns. Morningstar earns a trailing return on equity near 39.5% on a small book of about $26 per share, which is the signature of a capital-light business selling recurring data and research subscriptions rather than deploying capital. Its products, Morningstar Direct, PitchBook, indexes, and credit ratings, embed themselves in customers' daily workflow, and the filing quantifies how much the company keeps reinvesting in that position, noting Morningstar Direct Platform depreciation alone was "$44.7 million and $37.9 million for 2025 and 2024" (FY2025 10-K, accession 0001289419-26-000013). When a firm earns nearly 40% on equity while still pouring money into the platform, the durable advantage is in the switching costs of the installed base, not in any single year's numbers.

The operating leverage is real and showing up now. In Q1 2026 revenue rose 10.8% to $644.8 million while operating and adjusted operating income grew more than 30%, diluted EPS climbed 50% to $2.73, and adjusted diluted EPS rose 42.6% to $3.18. Management is converting subscription growth into far faster profit growth, which is exactly what a maturing software-and-data business should do once its platforms scale. PitchBook still contributed $172.4 million in the quarter, and the company keeps extending its intellectual property with new products like daily valuation estimates for venture-backed companies.

Capital allocation reinforces the per-share story. Morningstar reduced shares outstanding by roughly 4% over the past year and about 2.4% annualized over a longer window, so faster earnings are landing on a shrinking count. For a buyer who believes the subscription renewal base holds and operating leverage continues, the bull case is that a near-40% ROE compounder is being valued on multiples that several methods say it has already earned.

Bear Case

The structural caution is on the right side of the balance sheet, where a fee business that should run lean carries real debt. Net debt is about $1.2 billion against $568 million of trailing operating income, roughly 2.1x, with gross debt near $1.7 billion and only $514 million of liquid assets. The cost of that debt is itself leverage-sensitive: the filing describes a credit facility whose applicable margin "ranges between 1.05% and 1.425%, based on Morningstar's consolidated net leverage ratio" (FY2025 10-K, accession 0001289419-26-000013). Compounding the opacity, interest expense "is not separately reported in the latest filings, so interest coverage cannot be computed" from the public numbers. For a company whose entire valuation rests on a clean, capital-light cash machine, a leveraged book that prices off the leverage ratio is a fragility the headline ROE hides.

The growth that the price extrapolates is decelerating in the most important product. The combined revenue renewal rate for the PitchBook platform and direct-data product fell to "approximately 103%, compared with 108% in 2024," a decline the filing attributes to "softness in our corporate client seg"ment (accession 0001289419-26-000013), with venture-capital demand specifically weak. A net renewal rate sliding five points is the canary for a subscription franchise: it means existing customers are expanding less or churning more, which is precisely the variable a 16%-growth price cannot afford to keep slipping.

The valuation leaves no cushion for that slip. At $153.68 (June 27, 2026) the price sits at the very top of the fee-financial peer group on price-to-earnings, and the implied roughly 16% earnings growth has been sustained by only about 36% of fee firms over a five-year horizon. The earnings-power methods are blunt about the gap: Earnings Power Value lands at $43 and the FCF-yield frames at $55 to $71, all a fraction of the price, because they value the business on current normalized cash rather than extrapolated growth. The bear case is not that Morningstar is a bad business. It is that the market is paying a top-of-group multiple for continued mid-teens compounding at the same moment the renewal rate, the cleanest forward indicator, is going the wrong way.

Valuation

A capital-light fee business is worth the fee earnings it produces, so Morningstar is read off price-to-earnings rather than book. At $153.68 the stock trades near 30x earnings, a 3.3% earnings yield, which inverts into roughly 16% annual fee-earnings growth held over a five-year stage, computed at a 9.7% cost of equity where each point of cost of equity moves the implied growth about 4.6 points. That pace is within what Morningstar has delivered, but the multiple sits at the very top of the fee-financial group, and only about 36% of comparable firms have sustained this growth for five years, so the reverse solve flags the assumption as elevated.

The X-ray families split along a familiar line. The earnings-power family says expensive, with Earnings Power Value at $43, FCF yield at $71, and SBC-adjusted FCF yield at $55, because those capitalize current normalized cash with no growth. The asset family is mixed given the near-40% trailing ROE, from $14 on ROIC-justified book to $254 on the two-stage excess-return method.

The fee-financial reverse-DCF band lands tight, roughly $155 to $180 with a base near $167, which is modestly above the current price. That is the cleanest summary: on a normalized fee-earnings basis the business is worth a little more than it trades, but the price is paying for top-of-group growth to persist. The gap between the elevated earnings-multiple read and the lower earnings-power frames is the durability premium, and the renewal-rate softness is the reason to ask whether that premium is safe rather than assume it.

Catalysts

The April 2026 Q1 print is the key recent event and it was strong on profit: revenue of $644.8 million up 10.8%, a roughly 2.9% revenue beat and a 15% EPS beat, with operating and adjusted operating income up more than 30%, diluted EPS up 50% to $2.73, and adjusted diluted EPS up 42.6% to $3.18 (Businesswire, April 28, 2026; StockTitan). The mixed signal sits inside PitchBook, which contributed $172.4 million with revenue up about 5.3% (4.8% organic), as the direct-data business held up but venture-capital and corporate-client demand softened and the combined renewal rate eased.

The forward watch items follow directly from that mix. The first is whether PitchBook reaccelerates as the new intellectual property, including daily venture valuation estimates and public-style research on private firms, gains traction, and whether the renewal rate stabilizes above 100%. The second is continued operating-leverage conversion and the pace of buybacks, which removed about 4% of shares over the past year. Margin expansion has been the engine of the recent EPS growth, so any reversal there would matter more than a revenue miss.

Sources: Morningstar Q1 2026 results (Businesswire, April 2026); StockTitan and TipRanks Q1 2026 coverage; Quiver Quantitative earnings summary (2026).

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• SPGI (S&P Global Inc.)
• FY2025 10-K: …banks, private equity and technology-led companies that are adding content and analytics capabilities to their core businesses. • The competitive landscape also experiences consolidation in the form of mergers and acquisitions, joint ventures or strategic partnerships, which results in competitors that are better…
• FY2025 10-K: …For a further discussion of competitive and other risks inherent in our Indices business, see Item 1A, Risk Factors , in this Annual Report on Form 10-K. For a further discussion of the legal and regulatory environment in our Indices business, see Note 13 - Commitments and Contingencies to the consolidated financial…
• MCO (Moody’s Corporation)
• FY2025 10-K: …and SG&A Expense ⇑ $116 million Compensation expenses of $1,438 million increased $68 million, reflecting: Non-compensation expenses of $779 million increased $48 million, reflecting: - growth in salaries and benefits driven by recent acquisitions and annual salary increases - increases in technology infrastructure…
• FY2025 10-K: …PPIF revenue for the years ended December 31, 2025 and 2024 was comprised as follows: The 13% increase in PPIF revenue reflects increases in both the U.S. (16%) and internationally (7%), reflecting: - higher issuance in U.S. Public Finance, particularly within the state, regional, and healthcare sectors; and - higher…
• MSCI (MSCI INC.)
• FY2025 10-K: …based on the same index, (i) assets under management in one product could shift to products that pay MSCI lower fee levels, (ii) the products could compete for the same assets such that none of the products becomes large enough to be successful or sustained, or (iii) the failure or discontinuance of one product…
• FY2025 10-K: …the remaining 66.4 % interest in The Burgiss Group, LLC ("Burgiss") for $ 696.8 million in cash. Prior to the acquisition, Burgiss was a related party and its results were included in the Company's Burgiss operating segment as an equity method investment based on the Company's 33.6 % ownership. The Company's existing…
• TRU (TransUnion)
• FY2025 10-K: …differences may exist in the table above. We define Adjusted EBITDA margin for our segments as the segment Adjusted EBITDA divided by segment gross revenue. U.S. Markets Segment Revenue For 2025, U.S. Markets revenue increased $340.8 million, or 10.5%, compared with the same period in 2024. Revenue from Financial…
• FY2025 10-K: …investments, and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to either of the segments remain in Corporate. These costs are typically enterprise-level costs and are primarily administrative in nature. Selected segment financial information and disaggregated…
• EFX (EQUIFAX INC)
• FY2025 10-K: Revenue for 2024 increased 11% compared to 2023, driven by higher mortgage related online services due to product pricing and new products, as well as continued growth of consumer solutions revenue. Financial Marketing Services. Revenue increased 6% in 2025 compared to 2024 and increased 5% in 2024 compared to 2023.…
• FY2025 10-K: …the international markets in which we operate will grow at levels below those experienced in 2025. The direction of global economies, inflation and interest rates has an impact on the demand for our services. In particular, we expect U.S. mortgage credit activity in 2026 to be below the levels of activity seen in…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.