Top Rated Stocks in Sector
This is a list of the highest-rated companies in the sector, ranked by Morningstar Rating. To sort a column in ascending or descending order, click the column heading.
Morningstar Rating
The Morningstar Rating for Stocks is calculated by comparing a stock's current market price with Morningstar's estimate of the stock's fair value. Our rating system also includes an uncertainty adjustment, so that it's more difficult for a company to earn a 5-star rating the more uncertain we are of our fair value estimate.
Under our system, 3-star stocks are those that should offer a "fair return," one that adequately compensates for the riskiness of the stock. Three-star stocks should offer investors a return that's roughly comparable to the stock's cost of equity. (The cost of equity is often called a "required return" because it represents the return an investor requires for taking on the risk of owning the stock.)
Five-star stocks, of course, should offer an investor a return that's well above the company's cost of equity. Conversely, low-rated stocks have significantly lower expected returns.
The Morningstar Rating for Stocks also includes a small buffer around the cutoff between each rating, to reduce the number of rating changes produced by random market "noise." If a $50 stock moves up and down by $0.25 each day over a few days, the buffer will prevent the star rating from changing each day based on this insignificant change.
To generate the Fair Value Uncertainty Rating, analysts consider factors such as sales predictability, operating leverage, financial leverage, and a firm’s exposure to contingent events. Analysts then classify stocks into one of several uncertainty levels: Low, Medium, High, Very High, or Extreme. The greater the level of uncertainty, the greater the discount to fair value required before a stock can earn 5 stars, and the greater the premium to fair value before a stock earns a 1-star rating.
Industry
The company's primary area of business.
This field provides an easy way to search for stocks within a certain area of business. When making comparisons among stocks, it can be helpful to compare companies within the same area of business. Morningstar also provides percentile rankings within the company's industry for data such as net margin, revenue growth, earnings growth, and total return.
The information is gathered from the description-of business section of the company's 10-K form. The company is then coded using the North American Industrial Classification System. More information about the NAICS is available by calling 1-800-553-6847 to purchase a technical manual, visiting the Internet site at www.census.gov/naics, or calling an industry classification expert at 1-888-75NAICS.
Market Cap $Mil
The total equity market value of the company, expressed in millions of dollars. It equals shares outstanding times the stock price. It is updated daily.