Is the market cheap or expensive? The chart above tells the story based on Morningstar’s fair value estimates for individual stock. The graph shows the ratio price to fair value for the median stock in the selected coverage universe over time.
A ratio above 1.00 indicates that the stock's price is higher than Morningstar's estimate of its fair value. The further the price/fair value ratio rises above 1.00, the more the median stock is overvalued.
A ratio below 1.00 indicates that the stock’s price is lower than our estimate of its fair value. The further it moves below 1.00, the more the median stock is undervalued.