Prediction: Morningstar (MORN) Stock Will Be Worth More Than $13 Billion by 2031 -- 73% Higher Than Its Recent Value. Here's the Math.

Key Points

• Morningstar offers a growing dividend yield and a bigger total shareholder yield.
• Its shares seem undervalued and likely to grow a lot over the coming five years.
• 10 stocks we like better than Morningstar ›

Morningstar (NASDAQ: MORN) is a stock that hasn't been on my radar very much, but perhaps it should be -- because it seems undervalued, and it's growing. It recently sported a market value of $7.5 billion, and I think it could be worth $13.2 billion within five years. Permit me to show you why, via a little math.

Meet Morningstar

Like The Motley Fool, Morningstar offers data, information, and insights on gobs of companies and funds -- for individual investors as well as financial professionals. It also boasts about $375 billion in clients' assets under management, as of midyear.

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There's plenty to like about Morningstar -- such as its ongoing growth. Its net income in 2020 was $223.6 million, and that has risen to $421.6 million on a trailing-12-month basis. Its beta was recently 1, suggesting that its volatility roughly matches that of the overall stock market. So if the market swoons or surges by, say, 10%, Morningstar shares are likely to behave similarly.

In the company's last quarter, its earnings per share of $2.40 exceeded analysts' estimates. Its flagship platform grew by 6% year over year, while its newer PitchBook platform, offering data to venture capital and private equity businesses, saw revenue grow by nearly 10%.

Morningstar is a dividend-paying stock, with a recent dividend yield of 0.96%. More impressive is its total shareholder yield, which factors share buybacks into the picture. Per Morningstar itself, its total yield was recently a fat 13.2%.

Morningstar math

So why do I think the stock could be worth more than $13 billion in five years? Well, because it's been growing at a respectable clip, averaging annual gains of 12% over the past five years. (Specifically, its revenue grew from $1.39 billion in 2020 to $2.45 billion in 2025.)

If we apply that 12% growth rate to its recent market value of $7.5 billion (as of Sept. 8), it should grow to be worth around $13.2 billion in five years.

We can't just assume a stock will perform in the future as it did in the past. But in Morningstar's case, that seems reasonable to me, because the stock currently strikes me as undervalued.

For example, its current forward-looking price-to-earnings (P/E) ratio is 16.3, well below the 20.3 from three quarters ago and 31.9 from a year ago. Its price-to-sales ratio, meanwhile, was recently 3.3, down from 4.3 three quarters ago and 5.9 a year ago.

So if we wanted to estimate its future value more aggressively, we might assume a more fair value for it today of $10 billion -- which would reflect a forward P/E of around 22. And if that $10 billion grew by 12% for five years, Morningstar would end up valued closer to $18 billion.

Should you invest in Morningstar?

I wouldn't want to assume a future value of $18 billion, as things don't always happen as expected, at least not on our preferred timelines. But expecting the stock to be worth considerably more in five years does seem reasonable. Even that is not guaranteed, though, which is why rational investors will spread their hard-earned dollars across multiple stocks, for diversification.

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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.