Morningstar (MORN): Assessing Valuation as Momentum Fades and Shares Slide 37% in Past Year

Morningstar (MORN) shares have been under pressure this month, with the price finishing yesterday at $214.51. The stock is down 14% over the past month and has fallen 37% in the past year.

See our latest analysis for Morningstar.

Morningstar’s momentum has clearly faded as investors reassess both its valuation and growth outlook. After a tough stretch that saw a 1-year total shareholder return of -37.4%, the company’s short-term pressure is a sharp contrast to its more modest 19.7% five-year total return. This signals a market quickly shifting its stance as risks and opportunities are re-evaluated.

If recent market swings have you rethinking your approach, it could be the perfect time to broaden your perspective and discover fast growing stocks with high insider ownership

With Morningstar trading well below analyst price targets but facing lackluster momentum, the question becomes clear: is recent weakness a genuine buying opportunity, or has the market already accounted for all future growth?

Price-to-Earnings of 22x: Is it justified?

Morningstar trades at a price-to-earnings (P/E) ratio of 22x, which appears to make the stock look attractively priced compared to industry peers at the last close of $214.51. This lower multiple can suggest the market is not assigning a premium to recent performance or future growth prospects.

The price-to-earnings ratio measures how much investors are willing to pay today for each dollar of a company’s earnings. For Morningstar, this is a common valuation yardstick in the capital markets space, where earnings stability and consistency often take priority. The current P/E implies investors are cautious, possibly due to recent share price weakness and questions about future momentum.

Against the US Capital Markets industry average P/E of 25.7x, Morningstar’s shares are trading at a discount. However, compared to the estimated fair P/E ratio of 15.1x, the stock appears expensive. If the market adjusts to this fair value, the multiple could compress further. This difference highlights a tension between the valuation the market is currently assigning and what model-based analysis indicates might be sustainable in the long run.

Explore the SWS fair ratio for Morningstar

Result: Price-to-Earnings of 22x (ABOUT RIGHT)

However, risks remain, such as disappointing revenue or earnings growth. This could push shares even lower if investor sentiment continues to sour.

Find out about the key risks to this Morningstar narrative.

Another View: Discounted Cash Flow Paints a Different Picture

While the price-to-earnings comparison suggests Morningstar could be attractively valued, our DCF model offers a more sobering outlook. It estimates fair value at $99.24, well below the current share price. This approach implies the market may still be overvaluing future growth. Could the risk of further downside be greater than it first appears?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Morningstar for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Morningstar Narrative

If this perspective doesn’t fit your own views, or you’d rather dive in personally, you can compile your own data-driven narrative in just a few minutes, Do it your way.

A great starting point for your Morningstar research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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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