The Morningstar signature Price to Fair Value chart is designed to help investors assess a company’s shares using three key elements of our investment research.
First, the Economic Moat Rating evaluates a company’s sustainable competitive advantage. A wide-moat company has a high level of competitive advantage, a narrow-moat company has some competitive advantage, and a no-moat company has no sustainable competitive advantage.
Next, Morningstar calculates the Fair Value estimate based on how much cash we think the company will generate in the future. This long-term, intrinsic value estimate contrasts with the more volatile, market price.
The future is not certain, so Morningstar assigns a Fair Value Uncertainty rating to account for possible scenarios affecting a company’s future cash flows. The uncertainty rating appears as the thickness of a range of bands.
A superscript Q denotes a value that was determined by a quantitative model that estimates the value a Morningstar analyst would likely assign to the company.
Taken together, these elements provide investors not only with an up-to-date snapshot, but as Morningstar compares market prices to the Fair Value every day, we assemble a detailed, long-term perspective on our ratings and movements of the company’s share price.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.