Morningstar (MORN) Margin Improvement Reinforces Bullish Earnings Quality Narrative

Morningstar (MORN) has wrapped up FY 2025 with fourth quarter total revenue of US$641.1 million and basic EPS of US$2.84, capping a year where trailing twelve month revenue reached US$2.4 billion and EPS came in at US$8.93. Over the past few quarters, the company has seen quarterly revenue move from US$581.9 million in Q1 2025 to US$641.1 million in Q4, while basic EPS stepped from US$1.83 to US$2.84 over the same stretch, supported by earnings growth of 15.2% over the last year and net profit margins of 15.7%. Taken together, the results point to a business where profitability is holding up well and margins are doing some of the heavy lifting for shareholders.

See our full analysis for Morningstar.

With the headline numbers on the table, the next step is to see how these results line up with the key narratives investors follow around Morningstar’s growth, earnings quality, and margin profile.

Curious how numbers become stories that shape markets? Explore Community Narratives

15.2% earnings growth backs up the profit story

• Over the last 12 months, earnings grew 15.2% and net profit reached US$374.2 million on US$2.4b of revenue, which sits alongside a 15.7% five year earnings growth rate and gives you a sense of a business that has been adding profit consistently, not just in one good year.
• What really supports this profit profile is how it lines up with the numbers:
  • Quarterly net income in FY 2025 ranged from US$78.5 million in Q1 to US$115.1 million in Q4. Trailing twelve month net income stayed in a fairly tight band between US$369.9 million and US$404.1 million, which is consistent with the idea that earnings have had some stability around that 15.2% growth figure.
  • With trailing twelve month EPS at US$8.93 and quarterly EPS moving from US$1.83 in Q1 2025 to US$2.84 in Q4, the earnings record gives bulls concrete figures to point to when they talk about high quality results rather than just one off gains.

Curious how this earnings run fits into the bigger story other investors are telling about Morningstar? 📊 Read the full Morningstar Consensus Narrative.

Margins at 15.7% give profits some cushion

• Net profit margin over the last year sat at 15.7% compared to 14.7% a year earlier. Out of roughly US$2.4b in trailing revenue, about US$374.2 million dropped through to net income, which shows that Morningstar kept a meaningful share of its sales as profit.
• Supporters of the bullish view lean on this margin pattern, and the recent quarterly detail helps explain why:
  • In FY 2025, revenue moved from US$581.9 million in Q1 to US$641.1 million in Q4, while net income in those quarters was US$78.5 million and US$115.1 million. This suggests the company converted a reasonable slice of additional sales into extra profit instead of letting costs fully absorb it.
  • On a trailing basis, net income between US$369.9 million and US$404.1 million over the last six quarters of data, alongside net margins at 15.7%, gives bulls numbers they can reference when they argue that profitability is not just about top line growth but also about keeping margins resilient.

P/E of 16.8x vs DCF fair value gap

• The stock trades on a trailing P/E of 16.8x, which is below peer and US capital markets industry averages of 23.9x and 22.9x and below the broader US market P/E of 19.4x. Yet the current share price of US$160.03 sits above the DCF fair value of US$95.93, creating a clear split between earnings based and cash flow based valuation signals.
• Critics focus on this split when they push a more cautious, almost bearish angle, and the numbers give that view some weight:
  • On one side, the 16.8x P/E relative to higher peer and market multiples can be read as a valuation discount that looks friendly to bulls who are watching earnings and the 15.2% trailing earnings growth rate.
  • On the other side, the gap between the US$160.03 share price and the US$95.93 DCF fair value, even as analysts forecast earnings growth of about 10.02% and revenue growth of about 7.7% per year, supports the cautious argument that some investors may be paying a price that is above one cash flow based estimate of value.

If you want to see how optimistic investors justify that P/E discount story against the cash flow gap, 🐂 Morningstar Bull Case

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Morningstar's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Morningstar’s key weak spot is the gap between its US$160.03 share price and the DCF fair value of US$95.93, which raises questions about paying up today.

If that valuation gap makes you cautious, move quickly and scan our 56 high quality undervalued stocks to focus on companies where price and fundamentals look more closely aligned.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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