A … According to Morningstar, while assigning efficient scale as a source of the economic moat , the underlying company has been rated a narrow moat 88% of the time. Without a moat, profits are more susceptible to competition. with a narrow or wide economic moat. Companies with a narrow moat are those we believe are more likely than not to achieve normalised excess returns for at least the next 10 years. Intangible assets refer to the patents, brands, and licenses that allow a company to protect its production process and charge premium prices. Wide economic moats, on the other hand, offer substantial economic benefits and are expected to endure for a prolonged period of time, while narrow moats offer more modest economic benefits and typically last for a shorter period of time. Quantitative economic moat. An economic moat is a distinct advantage a company has over its competitors that allows it to protect its market share and profitability.
Consider Wal-Mart Stores Inc., which has an immense volume of sales and negotiates low prices with its suppliers, resulting in low-cost products in its stores that are hard to replicate by its competitors.
A company that exists in a business where the start-up costs are prohibitive for small entrants would also have a wide moat. Autodesk Inc. offers various software solutions for engineers and designers that are very difficult to learn.
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Economic moat is a distinct advantage a company has over its competitors which allows it to protect its market share and profitability. Please read our Any equity valuation involves a certain degree of uncertainty. Dog eat dog refers to intense competition in a market where products or services have become commoditized. A company that is able to maintain low operating expenses in relation to its sales compared to its peers has cost advantages, and it can undercut its competition by lowering prices and keeping rivals at bay. We are in the process of coming out with explicit ratings identifying the source(s) of a company’s competitive advantage. With each uncertainty rating is a corresponding set of price/fair value ratios that we use to assign star ratings, as shown in the graph.Once we determine the fair value estimate of a stock, we compare it with the stock’s current market price on a daily basis, and the star rating, is automatically re-calculated at the market close on every day the market is open.Our analysts keep close tabs on the companies they follow, and, based on thorough and ongoing analysis, raise or lower their fair value estimates as warranted. 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