Uncertainty Rating

The Morningstar Uncertainty Rating represents Morningstar equity analysts’ ability to pinpoint a stock’s fair value estimate. It helps analysts identify when a higher margin of safety is needed before investing, which in turn drives our stock star rating system.

The Morningstar Uncertainty Rating operates on a scale of Low, Medium, High, Very High, and Extreme. The recommended margin of safety—the discount to fair value demanded before Morningstar would recommend buying or selling a stock—widens as the uncertainty of the fair value estimate increases. The more uncertain Morningstar’s analysts are about the value of the stock, the more discounted the stock needs to be for Morningstar to recommend buying shares. For example, a stock with an Uncertainty Rating of Low is considered a “buy” when its price drops below 95% of its fair value estimate. For a stock with an Uncertainty Rating of Extreme, its price would have to be 50% of its fair value estimate for an analyst to recommend buying it.