We came across a bullish thesis on Morningstar, Inc. on Rebound Capital’s Substack. In this article, we will summarize the bulls’ thesis on MORN. Morningstar, Inc.'s share was trading at $216.38 as of December 1st. MORN’s trailing and forward P/E were 24.62 and 19.19 respectively according to Yahoo Finance. Morningstar, Inc. (MORN) is best known for its consumer-facing investment research, but the bulk of its revenue stems from premium data subscriptions sold to financial institutions. Its flagship platf ...

Core Insights - The article emphasizes the importance of understanding global investment trends and multi-asset allocation through data, tools, and research to enhance financial institutions' investment research systems and service efficiency [1]. Group 1: Global Fund Flows - In Q3 2025, bond funds saw a net inflow exceeding $368 billion, which is five times the inflow of equity funds [1]. - Active ETFs continued their strong momentum with a record net inflow of over $153 billion, marking a historical high, while passive open-end funds experienced rare net outflows [1]. - Digital asset funds, as an alternative investment, saw a 23% growth in total size compared to the end of Q2 2025 [1]. Group 2: Product Issuance Trends - China ranked first globally in the number of new fund issuances [1]. - Active ETFs consistently outpaced passive ETFs in issuance numbers worldwide [1]. - In mature markets, alternative assets and trading tool-type products are leading the trend in new fund issuances [1]. Group 3: Research and Analysis Tools - The article highlights the use of Morningstar Direct, a professional analysis platform covering over 600,000 investment products, to quickly identify market opportunities behind asset fund flows [2]. - The platform integrates data from global public funds, ETFs, and individual stocks, providing unique research support [2]. Group 4: Special Reports and Insights - A special interpretation of the "Morningstar Fund Company Rating Panorama Report" will be shared, discussing the relationship between fund company fee structures, product line stability, manager ownership rates, and future fund performance [5]. - Participants will receive the complete "Morningstar Fund Company Rating Panorama Report" and an opportunity to apply for a trial of Morningstar Direct [5].

Core Insights - The article highlights the significant trends in global investment, particularly focusing on the strong inflow into bond funds and the record growth of active ETFs, while also noting the resilience of digital asset funds as alternative investments [1][10]. Fund Flows and Market Trends - In Q3 2025, bond funds saw a net inflow exceeding $368 billion, which is five times the inflow of equity funds [1]. - Active ETFs continued their strong momentum with a quarterly net inflow of over $153 billion, marking a historical high, while passive open-end funds experienced rare net outflows [1]. - Digital asset funds, as an alternative investment, grew by 23% compared to the end of Q2 2025, indicating sustained interest in this sector [1]. Product Issuance and Market Position - China led the world in the number of new fund issuances, while globally, the issuance of active ETFs outpaced that of passive ETFs [1]. - In mature markets, alternative assets and trading tool-type products are dominating the trend of new fund issuances [1]. Research and Analysis Tools - The article emphasizes the use of Morningstar Direct, a professional analysis platform covering over 600,000 investment products, to capture global asset management trends and identify market opportunities [2][18]. - Participants in the event will receive insights from the "Morningstar Fund Company Rating Panorama Report," which discusses the relationship between fund company fee structures, product line stability, and future performance [5][9].

Q3 2025 Financial Performance - Revenue increased to $617.4 million, representing an 8.4% reported increase and a 9.0% organic increase[13] - Adjusted Operating Income increased to $150.6 million, compared to $130.3 million in Q3 24[13] - Free Cash Flow increased to $160.1 million, a 2.8% increase from $155.8 million in Q3 24[13] - The Adjusted Operating Margin was 24.4%[102] Segment Performance - Morningstar Direct Platform revenue reached $211.1 million, with a 6.3% reported increase and a 6.2% organic increase; Adjusted Operating Income was $93.7 million[49] - PitchBook revenue reached $169.0 million, with a 7.9% reported increase and a 7.7% organic increase; Adjusted Operating Income was $52.9 million[58] - Morningstar Credit revenue reached $91.1 million, with a 28.5% reported increase and a 27.0% organic increase; Adjusted Operating Income was $28.1 million[67] - Morningstar Wealth revenue reached $62.1 million, with a 0.5% reported increase and a 9.8% organic increase; Adjusted Operating Income was $3.1 million[81] - Morningstar Retirement revenue reached $34.2 million, with a 7.5% reported and organic increase; Adjusted Operating Income was $16.9 million[93] Cash Flow and Capital Allocation - Operating Cash Flow was $195.7 million[26] - Capital Allocation included $170.1 million in share repurchases, $35.6 million in capital expenditures, and $19.2 million in dividends paid[27]

Financial Performance Summary - Revenue increased by 5.8% to $605.1 million in Q2 25, with organic revenue growth of 5.9%[12] - Adjusted Operating Income increased by 9.5% to $143.4 million in Q2 25[12] - Free Cash Flow decreased by 48.3% to $62.4 million in Q2 25[12] - Adjusted Operating Margin increased to 23.7% in Q2 25[141] Segment Performance - Morningstar Direct Platform revenue increased by 6.2% to $209.2 million, with an adjusted operating margin of 46.0%[50] - PitchBook revenue increased by 9.8% to $166.5 million, with an adjusted operating margin of 31.7%[58] - Morningstar Credit revenue increased by 9.5% to $85.0 million, with an adjusted operating margin of 35.9%[66] - Morningstar Wealth revenue increased by 2.7% to $64.3 million, with an adjusted operating margin of 4.7%[77] - Morningstar Retirement revenue decreased by 2.7% to $32.4 million, with an adjusted operating margin of 47.5%[87] Key Product Trends - Morningstar Data revenue increased by 12.6% to $106.2 million[103] - PitchBook Platform Licenses increased by 7.6% to 128,679[109]

Financial Performance - Morningstar's revenue increased from $227.1 million in 2005 to $2,275.1 million in 2024[42] - The company's revenue grew by 11.6% in 2024, reaching $2,275.1 million[142] - Adjusted operating income increased by 51.2% to $493.8 million in 2024[142] - Free cash flow increased by 127.5% to $448.9 million in 2024[142] - In Q1 2025, revenue increased by 7.2% to $581.9 million[145] - Adjusted operating income in Q1 2025 increased by 22.2% to $135.4 million[145] Segment Performance - Morningstar Direct Platform's revenue increased by 5.5% in 2024[113] - PitchBook's revenue increased by 12.0% in 2024[116] - Morningstar Credit's revenue increased by 35.1% in 2024[121] - Morningstar Wealth's revenue increased by 8.0% in 2024[124] - Morningstar Retirement's revenue increased by 15.0% in 2024[128] - Corporate and All Other (including Morningstar Indexes and Sustainalytics) saw revenue increase by 29.3%[131] and decrease by -0.8%[131] respectively in 2024 Market Opportunity - The global spend on financial data/analysis is a $44.3 billion market with a 6.4% year-over-year growth[52, 53] - The managed account market size is $13.8 trillion with a 20.0% year-over-year growth[55] - The global indexes industry revenue is $6.4 billion with a 12.8% year-over-year growth[55]

Financial Data and Key Metrics Changes - In 2024, the company achieved revenue growth of 11.6%, with organic growth at 11.8%, reaching $2.275 billion for the first time [72][73] - Adjusted operating income increased from $326 million in 2023 to $494 million in 2024, representing a 51% growth in operating margin [73][84] - For Q1 2025, revenue growth was reported at 7.2%, with organic growth at 9.1%, and adjusted operating income grew by 22% [74][75] Business Line Data and Key Metrics Changes - Morningstar Direct, the largest reportable segment, grew from $700 million to $788 million, maintaining strong margins [88] - PitchBook revenue increased from $450 million in 2022 to $618 million in 2024, with margin expansion from 15.9% to 30% [89] - Morningstar Credit had a significant year, contributing meaningfully to adjusted operating income, while Morningstar Wealth improved from a negative profitability position to a neutral one [90][91] Market Data and Key Metrics Changes - The company noted a significant expansion in the institutional client base, which has grown from 750 clients at the time of the IPO to a much larger number in 2024 [39] - The private credit market is highlighted as a key growth area, with increasing demand for related services and products [47][49] Company Strategy and Development Direction - The company aims to leverage insights and AI to enhance efficiency and productivity, focusing on removing friction in client interactions [41][42] - Morningstar's strategy emphasizes building a strong balance sheet to support long-term growth and resilience against market fluctuations [34] - The company is committed to expanding its capabilities in private markets and enhancing its data offerings to meet evolving client needs [48][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue delivering growth and profitability, emphasizing the importance of a strong economic moat [76][94] - The leadership team is focused on capitalizing on market opportunities, particularly in the areas of private credit and wealth management [62][64] - The company recognizes the challenges in the Sustainalytics business and is working on restructuring its product offerings to better meet market demands [63] Other Important Information - The company celebrated its 20th anniversary as a public entity, reflecting on its growth and the benefits of being publicly traded [20][22] - A new Chief Strategy Officer was announced, indicating a commitment to strategic growth and continuity within the management team [30] Q&A Session Questions and Answers Question: What is the outlook for Morningstar's growth in the coming years? - Management indicated optimism about growth opportunities, particularly in private credit and the expansion of the institutional client base [39][47] Question: How is the company addressing challenges in the Sustainalytics business? - The company is focusing on simplifying its climate solutions and ensuring that its product suite meets market needs [63] Question: What are the key areas of investment for Morningstar moving forward? - The company plans to invest in technology and data capabilities to enhance its service offerings and drive growth [78][80]