Q&A on How Morningstar Values Stocks

Morningstar StockInvestor editor Matt Coffina answers your questions about Morningstar's valuation model

Matthew Coffina, CFA 16 May, 2013 | 4:07PM
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I recently hosted a webinar called "Valuation 101," in which I described how our analysts use discounted cash flow modelling to estimate the intrinsic value of stocks. If you missed it, a replay is available here.

We received many questions both before and during the presentation. I answered as many of them as possible during the presentation itself, including:

1) What are economic moat, moat trend, and stewardship ratings?
2) How do you calculate the Morningstar Rating for stocks and the margin of safety bands?
3) How do you calculate free cash flow?
4) How do you estimate a discount rate?
5) Do moats affect Morningstar's fair value estimates?
6) How do you calculate terminal value?
7) How does discounted cash flow analysis relate to P/E multiples?

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Berkshire Hathaway Inc Class A416,876.00 USD0.00Rating
Berkshire Hathaway Inc Class B276.69 USD0.00

About Author

Matthew Coffina, CFA  is a stock analyst at Morningstar.