Morningstar Expands Equity Research

The new ratings—Quantitative Fair Value Estimate, Quantitative Valuation, Quantitative Uncertainty, Quantitative Economic Moat, and Quantitative Financial Health—are based on quantitative statistics as well as Morningstar’s proprietary, analyst-driven equity ratings.   

“We’re offering a new level of equity coverage that leverages our existing analyst ratings and harnesses Morningstar’s robust global equity data on thousands of companies, allowing us to consistently apply our approach to equity analysis to a wider universe of stocks,” said Haywood Kelly, Morningstar’s senior vice president of equity and credit research. “The new quantitative ratings are driven by our analyst ratings and complement our existing analyst ratings and analysis. The ratings can serve as a second opinion for investors to consider when evaluating a company.”  

The new quantitative equity ratings comprise: 

• Quantitative Fair Value Estimate: Comparable to Morningstar’s Fair Value Estimate for stocks, which measures a company’s intrinsic value based on a discounted cash flow model, and represents the per share value of a company’s equity. The measure is expressed in the local currency.  
• Quantitative Valuation: Defined as the ratio of a company’s Quantitative Fair Value Estimate to its last market close price, and similar to the analyst-driven Fair Value Estimate to last market close price ratio. The rating is expressed as Overvalued, Fairly Valued, or Undervalued.  
• Quantitative Uncertainty: Describes the level of uncertainty around the Quantitative Fair Value Estimate, comparable to the Uncertainty Rating for the analyst Fair Value Estimate. The rating is expressed as Low, Medium, High, Very High, or Extreme.  
• Quantitative Economic Moat: Corresponds to Morningstar’s Economic Moat rating, which measures a company’s sustainable competitive advantages. The quantitative rating is expressed as None, Narrow, or Wide.  
• Quantitative Financial Health: Based on Morningstar’s proprietary measure of the likelihood of financial distress. The quantitative rating is expressed as Weak, Moderate, or Strong. 

The new Quantitative Equity Research Report includes Morningstar's quantitative equity ratings, along with comparisons to aggregate scores for the entire universe of rated companies, as well as a company's sector and country. The report also includes five years of historical financial data and a Competitive Advantage Trend chart, which displays the historical values of the Quantitative Economic Moat over the last seven years.  

The ratings and reports are available through Morningstar data feeds and in Morningstar Direct, its global investment analysis platform for institutional investors. Morningstar plans to add the quantitative equity ratings and reports to Morningstar Office, its investment planning and research platform for financial advisers, and Morningstar Analyst Research Center for stocks within Morningstar Advisor Workstation later this year. Quantitative ratings for companies for which Morningstar does not provide analyst coverage will be available later this year through the Premium Membership on individual investor website Morningstar.com.