3 Five Star Undervalued Stocks

THE VALUE INVESTOR: These three UK companies are trading at significantly less than their fair value estimate according to Morningstar stock analysts

Emma Wall 23 January, 2015 | 11:36AM
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Are you a contrarian investor? Contrarian investors ignore the herd and look for quality stocks that are trading at significantly less than they believe the company is truly worth. Morningstar stock analysts estimate of the stock’s fair value; our uncertainty about how tightly we feel we can bound that fair value; and the stock’s current market price.

Our fair-value estimates are based on our projection of a company’s future cash flows, and our estimate of the appropriate discount rate to apply to those cash flows. Our analysts follow their companies daily, and if their inputs change, we update our assessment of the stock’s fair value.

Depending on where the stock is trading in relation to this fair value estimate the stock is assigned a quantitative star rating – three stars is fairly valued, one star means the stock is very overvalued, and five stars suggests the stock is significantly undervalued.

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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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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BHP Group PLC1,962.00 GBP0.00Rating
Tullow Oil PLC43.47 GBP0.00

About Author

Emma Wall  is former Senior International Editor for Morningstar