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What is the Morningstar Fair Value Estimate for Stocks?

When determining a stock's fair value estimate, Morningstar equity analysts take into account the predictability of a company’s future cash flows

Morningstar 17 February, 2016 | 11:52AM


Speaker: The Morningstar Fair Value Estimate tells investors what the long-term, intrinsic value of a stock is, helping them see beyond the present market price. Morningstar calculates the fair value estimate of a company based on how much cash we think the company will generate in the future.

When determining the fair value estimate, Morningstar also takes into account the predictability of a company’s future cash flows - the uncertainty rating. A stock with a higher uncertainty rating, requires a larger margin of safety before earning a 4 or 5 star rating.

The Morningstar Fair Value Estimate is a measuring stick for determining long-term, intrinsic 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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