4-Star Stocks | Morningstar (2024)

FAQs

What is a 4-star rating stock? ›

A 4-star rating means the stock is moderately undervalued and trading at a slight discount relative to its fair value estimate.

Five-star stocks, should offer an investor a return that's higher than the company's cost of equity. Low-rated stocks have significantly lower expected returns. Three-star stocks are those that should offer a "fair return," one that adequately compensates for the riskiness of the stock.

Funds whose risk-adjusted returns fall within the top 32.5% relative to category peers receive a 4-star rating. Subscribe to Morningstar Investor to get the full picture of an ETF's potential.

Exhibit 3 shows that since June 2001, our 5-star calls have delivered an average three-year annualized total return of 12.2%, and our 1-star stock calls have delivered a three-year annualized total return of 9.0%. These results signify that the average stock call we made added value to investors.

Four-star reviews are from customers who are generally happy with your product or service. Nevertheless, there might be some minor issues that could be improved. This could be something like the time of delivery, a misunderstanding of the product, or the service could have been a little friendlier.

A rating of 3.5 stars or higher suggests that a product has met the basic standards for the majority of customers. However, for industry leading products, 4.5 star ratings are common and brands that can compete with these high ratings will get extra exposure.

The higher the number of stars, the better the fund's performance has been relative to similar funds. Five stars indicate a fund ranks in the top 10% of its peer group. Four stars is the second-highest group, comprising 22.5% of the category. One star indicates a fund ranks in the bottom 10%.

What is Morningstar 5-star vs 4 star? ›

The Morningstar Rating for funds follows a bell-curve distribution. The top 10% of funds in a category receive a 5-star rating. The next 22.5% receive a 4-star rating.

If you are an active and value investor, Morningstar is the perfect investment research service for you. They have extensive research on everything from mutual funds to bonds, covering more than 620,000 investments.

Morningstar, Inc. (MORN) is a leading provider of financial information via Internet, software, and print-based products to individual, professional, and institutional investors. Its largest competitors in the financial information sector are Bloomberg, L.P., MarketWatch, Inc., and Thomson Reuters Corp. (TRI).

Morningstar is a highly regarded mutual fund and exchange-traded fund (ETF) rating agency. The agency's research is used by many big names in the financial sector, including the Financial Industry Regulatory Authority.

Seeking Alpha and Morningstar take very different approaches to their platform features and investment tools: Stock data – Morningstar has an edge here with more extensive financial data on individual stocks including 10-year history. Seeking Alpha provides key stock metrics but less raw data.

Analyst Rating Averages

Most analysts indicate a “buy” or “strong-buy” rating if the average rating is one. If the average rating is close to five, most analysts rate the stock as a sell.

Stocks get a grade of 1 to 5 for each criterion, 5 being the worst and 1 being the best score. The Overall score is based on the average score of all five criteria. Stocks must get an average score of 1.4 or below to be rated Very Attractive.

A 5-star rating means the stock is undervalued and trading at an attractive discount relative to its fair value estimate.

Websites that aggregate stock analyst ratings often give stocks a score of 1–5. The weighting of the ratings is 1 for buy, 2 for outperform, 3 for hold, 4 for underperform, and 5 for sell. If the average rating is close to 5, that means that most analysts rate the stock as a sell.