What a brutal six months it’s been for Morningstar. The stock has dropped 39% and now trades at $159.50, rattling many shareholders. This might have investors contemplating their next move.

Given the weaker price action, is now a good time to buy MORN? Find out in our full research report, it’s free.

Why Is MORN a Good Business?

Founded in 1984 by Joe Mansueto with just $80,000 in personal savings, Morningstar (NASDAQ: MORN) provides independent investment data, research, and analysis tools that help investors, advisors, and institutions make informed financial decisions.

1. Long-Term Revenue Growth Shows Strong Momentum

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

Thankfully, Morningstar’s 12% annualized revenue growth over the last five years was solid. Its growth surpassed the average financials company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Morningstar’s full-year EPS grew at an astounding 30.4% compounded annual growth rate over the last three years, better than the broader financials sector.

3. Stellar ROE Showcases Lucrative Growth Opportunities

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Morningstar has averaged an ROE of 16.1%, impressive for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Morningstar has a strong competitive moat.

Final Judgment

These are just a few reasons why we think Morningstar is an elite financials company. After the recent drawdown, the stock trades at 14.2× forward P/E (or $159.50 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

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