Core Thesis - Morningstar, Inc. is viewed positively despite a 35% year-to-date stock decline, attributed to its strong subscription-based revenue model and potential for future growth [2][4]. Company Overview - Morningstar, Inc. primarily generates revenue from premium data subscriptions to financial institutions, with flagship platforms like Morningstar Direct and PitchBook [2]. - The company’s stock was trading at $216.38 as of December 1st, with trailing and forward P/E ratios of 24.62 and 19.19 respectively [1]. Financial Performance - The company experienced a 10% increase in operating expenses in Q4 2024, which outpaced a 9.7% revenue growth, leading to margin compression [3]. - Q1 2025 results indicated a recovery in margins, but revenue growth slowed to 7.2%, reflecting cautious spending in the financial sector due to macroeconomic concerns [3]. Business Strengths - Morningstar maintains a strong business model with steady cash flow from subscriptions, generating over $400 million in annual free cash flow [4]. - The company has a history of increasing dividends for 16 consecutive years, indicating financial stability [4]. Recent Developments - A recent acquisition of CRSP for $375 million enhances Morningstar's data ecosystem and expands its coverage into public markets [4]. - Despite current challenges, potential Federal Reserve rate cuts and a revival in deal activity could lead to a re-rating of the stock, presenting upside for long-term investors [4]. Market Context - The decline in Morningstar's stock price is part of a broader trend affecting the industry, with peers like FactSet also experiencing significant downturns due to reduced deal activity from high interest rates [3][5]. - The long-term investment thesis remains intact, supported by the resilience of Morningstar's subscription model [5].