Morgan Stanley(US:MS) seekingalpha.comยท2024-05-26 20:22Core Insights - MSCI Inc. is identified as a wealth compounder, demonstrating a strong track record of 20% annual returns since its spin-off from Morgan Stanley, with a focus on diverse revenue streams and strong fundamentals [33][35]. - The company has a wide-moat business model, benefiting from significant demand for its index services, ESG solutions, and private asset data analysis, covering $15.6 trillion in assets [10][14]. Group 1: Company Overview - MSCI provides specialized services to help investors navigate global market complexities, leveraging its expertise in investment processes, research, data, and technology [9]. - The company serves nearly 7,000 clients across more than 95 countries, with BlackRock being its largest client, contributing approximately 10% to its operating revenue [12]. Group 2: Financial Performance - Since its spin-off in November 2007, MSCI has achieved an annual return of 19.5%, turning an initial investment of $10,000 into $219,750 [6]. - The company has compounded its revenue by 13% per year since 2019, with adjusted EPS growing at a rate of 20% per year during the same period [22]. Group 3: Growth Drivers - MSCI is experiencing strong demand for its ESG and climate solutions, with climate-related products accounting for nearly 20% of its total ESG run rate and showing 40% growth [27]. - The company is diversifying into the private asset market through the acquisition of Burgiss, enhancing its capabilities in providing private market portfolio coverage [27]. Group 4: Dividend and Valuation - MSCI has a dividend yield of 1.3%, with a five-year CAGR of 20.8%, reflecting aggressive dividend growth supported by a low payout ratio in the low-40% range [19][21]. - Currently trading at a blended P/E ratio of 35.2x, MSCI's valuation is considered premium compared to its normalized P/E ratio of 30.0x since the spin-off, with analysts projecting a 12% annual EPS growth from 2024 to 2026 [30][32].