Simply Wall St
5 min read
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If you are wondering whether Morningstar’s current share price still lines up with its long term potential, the key question now is what you are really paying for at around US$213.91 per share.
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The stock is flat over the last 30 days, slightly positive year to date at 1.7%, and has a 1 year return of a 34.1% decline, which can change how investors view both its growth prospects and risk profile.
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Recent coverage around market data, research platforms, and asset management businesses in general has kept attention on how established financial data providers are positioned, especially as investors reassess which business models they want exposure to. This broader conversation has fed into sentiment around companies like Morningstar, where recurring revenue, brand strength, and product mix often sit at the center of the debate.
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Morningstar currently scores 3 out of 6 on our valuation checks. Next we will look at the usual valuation methods before circling back to a different way of thinking about what this price really implies.
Find out why Morningstar’s -34.1% return over the last year is lagging behind its peers.
The Excess Returns model looks at how much profit a company can generate above the return that equity investors typically require, then capitalizes those surplus profits into an estimated per share value.
For Morningstar, the model starts with a Book Value of US$36.48 per share and a Stable EPS of US$6.47 per share, based on the median return on equity from the past 5 years. The Average Return on Equity is 15.39%, while the Cost of Equity is US$3.52 per share. That gap feeds into an Excess Return of US$2.95 per share, which represents the value created after covering the required return.
The analysis also uses a Stable Book Value of US$42.05 per share, sourced from weighted future Book Value estimates from 2 analysts. Putting these inputs together, the Excess Returns model arrives at an intrinsic value estimate of about US$99.89 per share.
Against a current share price of around US$213.91, this implies the stock is 114.1% overvalued based on this approach.
Result: OVERVALUED
Our Excess Returns analysis suggests Morningstar may be overvalued by 114.1%. Discover 863 undervalued stocks or create your own screener to find better value opportunities.
