With a 12.69% daily gain and a 15.57% increase over the past three months, Morningstar Inc (MORN, Financial) has been making waves in the financial market. Its Earnings Per Share (EPS) stands at 0.53, contributing to the company's financial performance. But the question remains: Is the stock modestly undervalued? This article offers an in-depth valuation analysis to answer this question. Read on to uncover the financial intricacies of Morningstar (MORN).
Company Overview
Established as a provider of independent investment research, Morningstar Inc has carved a niche for itself in the financial industry. The company's operations are focused on two core sectors: data and research. Morningstar offers data on a variety of investments and real-time market data of equity, derivative, and currency exchanges. Its research operations include analyst research on mutual funds, alternative funds, and college saving plans. A significant share of Morningstar's revenue is generated in the United States.
Comparing the stock price of $248 per share to the GF Value of $306.47, Morningstar appears to be modestly undervalued. With a market cap of $10.60 billion, this analysis paves the way for a more profound exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on the GuruFocus Value calculation, Morningstar (MORN, Financial) appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Therefore, it's important to review the financial strength of a company before deciding whether to buy its stock. Morningstar's cash-to-debt ratio stands at 0.28, which is worse than 81.9% of 757 companies in the Capital Markets industry. This ranks the overall financial strength of Morningstar at 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. Morningstar has been profitable 10 over the past 10 years, with a revenue of $1.90 billion and an Earnings Per Share (EPS) of $0.53 over the past twelve months. Its operating margin is 6.42%, ranking worse than 52.62% of 648 companies in the Capital Markets industry. However, GuruFocus ranks the profitability of Morningstar at 9 out of 10, indicating strong profitability.
Growth is one of the most important factors in the valuation of a company. Morningstar's 3-year average revenue growth rate is better than 68.53% of 680 companies in the Capital Markets industry. However, its 3-year average EBITDA growth rate is 0.5%, which ranks worse than 67.86% of 473 companies in the Capital Markets industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. Morningstar's ROIC was 1.64 over the past 12 months, while its WACC came in at 10.3. This indicates that the company is creating value for shareholders.
Conclusion
In conclusion, the stock of Morningstar appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Despite its growth ranking worse than 67.86% of 473 companies in the Capital Markets industry, the company shows promise. For more information on Morningstar stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
