Morningstar (MORN): Evaluating Valuation Following New Retirement Partnership With NPPG Plan Professionals

Morningstar (MORN) just announced a collaboration with NPPG Plan Professionals that will bring its advisor managed accounts service to NPPG’s pooled retirement plans. The partnership aims to offer personalized retirement solutions for small and mid-sized employers, which could expand Morningstar’s reach in the retirement sector.

See our latest analysis for Morningstar.

Morningstar’s new partnership comes after recent leadership changes, with a new Chief Revenue Officer set to take over in November. While these moves signal a strategic shakeup, the share price has retreated this year, posting a year-to-date drop of nearly 34% and a 1-year total shareholder return of -33.7%. That is a clear sign of fading momentum, even as the company pursues new growth channels.

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With shares trading more than 30% below their 52-week highs and at a notable discount to analyst targets, the question arises: is this a rare value opportunity for Morningstar, or is the market already accounting for any future growth?

Price-to-Earnings of 22.9x: Is it justified?

Morningstar’s current share price implies a price-to-earnings (P/E) multiple of 22.9x, yet this sits above both its estimated fair value and recent price momentum. This higher multiple puts Morningstar in a tricky valuation spot compared to historical benchmarks and its competitive set.

The P/E ratio indicates how much investors are willing to pay for each dollar of Morningstar’s earnings. It offers a quick snapshot of market expectations for growth versus the company’s actual performance. At 22.9x, investors are paying more for current earnings than what broader analysis suggests would be fair (15x). This raises questions about whether upside is already priced in.

Despite posting impressive recent profit growth, the P/E ratio of 22.9x overshoots both the Capital Markets industry average of 26.6x and its peers’ average of 29.2x. However, it is still labeled as expensive relative to fair value estimates. If the market reverts to the calculated fair ratio, the stock could face further pressure.

Explore the SWS fair ratio for Morningstar

Result: Price-to-Earnings of 22.9x (OVERVALUED)

However, slowing revenue growth and recent share price volatility could challenge Morningstar’s upside, particularly if market conditions remain uncertain.

Find out about the key risks to this Morningstar narrative.

Another View: What Does the SWS DCF Model Say?

Taking a different approach, our DCF model estimates Morningstar’s fair value at just $99.22 per share, which is far below its current market price of $219.54. While multiples suggest the stock is on the expensive side, DCF raises a much bigger red flag. Could the market be missing some downside risk?

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

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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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