Morningstar, Inc.

Morningstar’s advantages span several classic moat sources. Intangible assets include widely adopted methodologies like the Star Rating and Medalist Rating, trusted equity and manager research, and the DBRS brand in credit.

High switching costs are evident in enterprise integrations of Morningstar Data, Direct, Advisor Workstation, and PitchBook, where workflows, APIs, and historical data become embedded. Network effects arise as more contributors and users enhance PitchBook’s private markets database, and as more securities and funds are covered in core databases.

Efficient scale applies to credit ratings, where the market supports a few agencies; DBRS is the world’s fourth largest by coverage. The pending CRSP acquisition would further strengthen indexes with benchmarked AUM exceeding 3 trillion, enhancing durable asset‑based economics.

Offsets include the possibility that generative AI reduces the perceived differentiation of some research outputs, and that large asset managers pursue self‑indexing or push down index fees.

Pricing power is solid across data and software, improving in credit and indexes, and still building in wealth-related tools. In Q2 2025, Direct Platform revenue grew despite only a small license increase, implying effective pricing and mix; PitchBook’s user base expanded while margins stayed >30%.

Index licensing tied to AUM should benefit from CRSP scale, though fee pressure is a watch item with large clients. Credit shows attractive economics with mid-30s adjusted margins.

Overall, Morningstar can pass through inflation and charge for incremental datasets and analytics, but pockets of price sensitivity among US asset managers and continued normalization in sustainability products limit a higher score.

Visibility is high due to multi‑year subscriptions, recurring data feeds, and sticky platforms. Contract liabilities disclosure shows meaningful future revenue to be recognized, supporting forward predictability.

Asset‑ and transaction‑driven components, such as index licensing and ratings issuance, do add cyclical exposure to markets and issuance volumes, but are balanced by subscriptions.

The past decade shows steady growth from roughly 760 million revenue in 2014 to 2.275 billion in 2024. The business is globally diversified across North America, Europe, and APAC with limited direct exposure to problematic jurisdictions.

Morningstar’s balance sheet is conservative.

As of June 30, 2025, cash and investments were 541.6 million against 838.8 million of debt, and the company reported compliance with all covenants; leverage was about 0.9x EBITDA at year‑end 2024. Fixed 2.32% 2030 notes and a sizable SOFR‑based revolver provide flexibility, and TTM free cash flow is about 390 million.

This provides capacity to fund organic investment and selective M&A while maintaining resilience through cycles.

Management has a mixed‑to‑good record of value creation via acquisitions and organic investment. PitchBook, DBRS, and Sustainalytics expanded the firm’s relevance; 2025 bolt‑ons include DealX and Lumonic. Shareholder returns include a regular dividend and notable buybacks in 1H 2025, while the CRSP deal aims to scale Morningstar Indexes.

Stock‑based compensation was 54.7 million in 2024, manageable against scale, with buybacks helping offset dilution. We view the CRSP price as strategic but not risk‑free given client concentration and fee sensitivity.

Checklist snapshot with scores and brief rationale: 1) Moat durability 90 strong multi‑moat; 2) Returns on capital 75 improving post‑investment phase; 3) Rev and FCF growth 80 consistent double‑digit decade CAGR; 4) Margins 78 healthy and expanding; 5) Owner‑CEO 85 founder‑led board with aligned CEO; 6) Simplicity 75 diversified but understandable; 7) Debt 80 low net leverage; 8) Dilution 75 SBC moderate, offset by buybacks; 9) Jurisdiction 90 US based, global footprint; 10) Trend alignment 80 positioned for private markets, indexing, advice tech; 11) Superinvestor fit 80 classic toll‑booth data economics; 12) Valuation 60 attractive at the right FCF yield.

Founder Joe Mansueto remains a significant owner and executive chairman. Kunal Kapoor has led steady expansion into private markets, credit, and indexes. New CFO Michael Holt, formerly chief strategy officer and head of Research & Investments, has a track record in capital allocation and operating discipline.

Governance practices include written investor Q&A in lieu of calls, transparent capital allocation commentary, and a conservative leverage posture. Mansueto has a disclosed share pledge of 1 million shares that is shrinking and monitored by the board.