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What Do Morningstar Stock Ratings Mean?

The Morningstar Fair Value Estimate is a measuring stick for determining long-term, intrinsic value - this is then used to produce a star rating to help investors make informed decisions

Morningstar 15 February, 2016 | 9:35AM


Speaker: The Morningstar Rating for stocks can help investors uncover stocks that are truly undervalued, cutting through the market noise. The Rating is determined by three factors: a stock's current price, Morningstar's estimate of the stock's fair value, and the uncertainty rating of the fair value.

The bigger the discount, the higher the star rating. Four and five-star ratings mean the stock is undervalued, while a three-star rating means it's fairly valued, and one and two-star stocks are overvalued.

When looking for investments, a five-star stock is generally a better opportunity than a one-star stock. Investors can use the Morningstar Rating for stocks to evaluate a stock’s true value.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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