The Morningstar Fair Value Estimate tells investors what the long-term intrinsic value of a stock is, helping them see beyond the present market price.
Morningstar calculates the fair value estimate of a company based on how much cash we think the company will generate in the future. When determining the fair value estimate, Morningstar also takes into account the predictability of a company's future cash flows--the uncertainty rating. A stock with a higher uncertainty rating requires a larger margin of safety before earning a 4- or 5-star rating.
The Morningstar Fair Value Estimate is a measuring stick for determining long-term intrinsic value.
