Indicates how much information we have about the company, therefore how confident we are in its Appraisal Per Share. There are five levels: Highest Predictability, High Predictability, Medium Predictability, Low Predictability, and Lowest Predictability.
Benefit
Used along with the Appraisal Ratio, the Predictability measure can give a quick indication of whether a stock is overvalued or undervalued.
Origin
This figure is calculated in-house on a monthly basis using Morningstar’s proprietary model.
For the Pros
As a starting point, investors may want to look for stocks in the sector they are interested in that have a high Appraisal Ratio and the Highest Predictability level. Experienced investors may be interested in stocks with low Predictability levels. Because we have less information about these stocks, investors may be in a good position to uncover overlooked stocks through their own research. The Business Appraisal cannot capture all factors relevant to a stock’s valuation, so investors should always do additional research before investing.