A small slide in Enbridge Inc.’s share price, compared with a bullish long-term view, has earned the stock one of the rare five-star equity ratings given out by Morningstar Inc.
The research firm pegs a stock’s fair value based on its estimates of future cash flows. Then, it compares that with the market price and its views of a stock’s risk to arrive at its star rating.
As Enbridge’s U.S.-listed shares slipped below US$34.30 this week, it gained the five-star rating. Morningstar has a US$49 fair-value estimate on the NYSE-traded shares (roughly $63.75 in Canadian dollars). Enbridge’s TSX-listed shares are currently trading above $42.
“We believe the stock is deeply undervalued based on the company’s vast growth portfolio, highlighted by the lucrative natural gas projects associated with the Spectra acquisition and the Line 3 Replacement,” Morningstar analyst Joe Gemino wrote in May.
Only 198 stocks out of nearly 14,500 rated by Morningstar – or less than 1.5 per cent – currently have a five-star rating, according to the company’s screening tool.
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David Milstead