Morningstar is being priced as if artificial intelligence is about to hollow out a research and data franchise, even as the company just bought the benchmarks sitting under the largest total-market funds in the United States and is running a credit-ratings cycle that is carrying the growth print. The equity changes hands near $204, well below last year's high and at a mid-teens earnings multiple that sits closer to FactSet than to MSCI or Moody's. That gap is the entire debate.
What is actually moving is a split inside the portfolio. Morningstar Credit is growing at more than twenty percent and has cleared $100 million of quarterly revenue for a third straight period, helped by structured-finance issuance and private ratings. PitchBook and the Direct Platform are growing in the mid-single digits with essentially flat license counts, which is the pattern that invited the de-rating. Management is spending the cash anyway: four hundred million of share repurchases in the first half, funded in part by a jump in net debt after the CRSP close.
The second-quarter print showed operating margin expanding even while technology and amortization costs rose, and free cash flow, cash from operations minus capital spending, nearly doubled. The question the next several quarters resolve is whether Credit and the new index franchise can keep compounding after issuance normalizes, or whether flat seats at PitchBook and Direct prove that the software franchise has already matured.