Morningstar (MORN)

Investment research firm Morningstar (NASDAQ:MORN) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 8.5% year on year to $641.1 million. Its GAAP profit of $2.83 per share was 31% above analysts’ consensus estimates.

Company Overview

Founded in 1984 by Joe Mansueto with just $80,000 in personal savings, Morningstar (NASDAQ:MORN) provides independent investment data, research, and analysis tools that help investors, advisors, and institutions make informed financial decisions.

Financial exchanges and data providers operate trading platforms and sell market information. They enjoy relatively stable revenue from trading fees and subscriptions, increasing demand for data analytics, and expansion opportunities in emerging markets. Challenges include regulatory oversight of market structure, competition from alternative trading venues, and substantial technology investments needed to maintain low-latency trading infrastructure and data security.

Morningstar's competitors include Bloomberg, FactSet, and LSEG (Refinitiv) in data and analytics; MSCI, S&P Global, and Moody's in research and ratings; Envestnet and SEI Investments in wealth management platforms; and CB Insights and Preqin in private market data.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Morningstar’s 12% annualized revenue growth over the last five years was solid. Its growth surpassed the average financials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Morningstar’s annualized revenue growth of 9.5% over the last two years is below its five-year trend, but we still think the results were respectable. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Morningstar reported year-on-year revenue growth of 8.5%, and its $641.1 million of revenue exceeded Wall Street’s estimates by 2.2%.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Financial Exchanges & Data companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

The pre-tax profit margin includes interest because it's central to how financial institutions generate revenue and manage costs. Tax considerations are excluded since they represent government policy rather than operational performance, giving investors a clearer view of business fundamentals.

Over the last five years, Morningstar’s pre-tax profit margin couldn’t build momentum, hanging around 20.2%. Luckily, it seems the company has recently taken steps to address its expense base as its pre-tax profit margin expanded by 11.7 percentage points on a two-year basis.

In Q4, Morningstar’s pre-tax profit margin was 23.5%. This result was 2 percentage points worse than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Morningstar’s full-year EPS grew at an astounding 30.4% compounded annual growth rate over the last three years, better than the broader financials sector.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Morningstar, its two-year annual EPS growth of 64.7% was higher than its three-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, Morningstar reported EPS of $2.83, up from $2.71 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Morningstar’s full-year EPS of $8.91 to grow 17.3%.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Morningstar has averaged an ROE of 15.1%, healthy for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Morningstar has a decent competitive moat.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Morningstar currently has $1.11 billion of debt and $1.22 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.7×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 3.5× for a financials business.

It was good to see Morningstar beat analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock remained flat at $153.39 immediately following the results.

Updated: February 12, 2026 at 11:49 PM EST

Before making an investment decision, investors should account for Morningstar’s business fundamentals and valuation in addition to what happened in the latest quarter.

Morningstar is an amazing business ranking highly on our list. For starters, its revenue growth was solid over the last five years. On top of that, its astounding EPS growth over the last three years shows its profits are trickling down to shareholders, and its solid ROE suggests it has grown profitably in the past.

Morningstar’s P/E ratio based on the next 12 months is 14.9x. Looking at the financials space today, Morningstar’s qualities as one of the best businesses really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $280.67 on the company (compared to the current share price of $154.09), implying they see 82.2% upside in buying Morningstar in the short term.