Why do stocks' fair value estimates change?

We explain some of the main reasons Morningstar equity analysts may adjust their assessment of a stock's intrinsic value.

Karen Wallace 3 April, 2017 | 5:00PM

Question: Why and when does Morningstar change fair value estimates for stocks?

Answer: There are many reasons Morningstar equity analysts might make a change to our fair value estimates. Many times the change is not a large, wholesale change; it's often the result of a small tweak to our model based on a time-value-of-money update, or an increase or decrease in the underlying inputs in our model based on new information revealed in quarterly earnings reports.

But other times we do make material changes to our fair value estimates when new information becomes available that causes us to re-evaluate our near-term or long-term thesis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Advanced Micro Devices Inc54.72 USD2.11
Apple Inc388.23 USD1.65
Bristol-Myers Squibb Company57.89 USD0.24
Costco Wholesale Corp328.00 USD1.57
Merck & Co Inc78.25 USD1.16
Rayonier Inc25.99 USD3.09
Reckitt Benckiser Group PLC ADR19.63 USD0.56
Twitter Inc34.38 USD1.66
Weyerhaeuser Co24.46 USD2.99

About Author

Karen Wallace

Karen Wallace  Karen Wallace, CFP® is Morningstar’s director of investor education.

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