It is deemed value if its score equals or falls below the 'value threshold '(normally about -15 for large-cap stocks). A stock is classified as growth if the net score equals or exceeds the 'growth threshold' (normally about 25 for large-cap stocks). The resulting number can range from 100 (for low-yield, extremely growth-oriented stocks) to -100 (high-yield, low-growth stocks). To determine the overall style score, the value score is subtracted from the growth score. Growth and value characteristics for each individual stock are compared to those of other stocks within the same capitalization band and are scored from zero to 100 for both value and growth. Historical earnings growth 12.5% Sales growth 12.5% Cash flow growth 12.5% Book value growth 12.5%.Price/book 12.5% Price/sales 12.5% Price/cash flow 12.5% Dividend yield 12.5%.

The scores for a stock's value and growth characteristics determine its horizontal placement:.

The style attributes of individual stocks are then used to determine the style classification of stock mutual funds. Stocks are evaluated against other stocks in the same geographic area (United States, Latin America, Canada, Europe, Japan, Asia ex-Japan, Australia/New Zealand). Morningstar determines the investment style of each individual stock in its database. Style Box assignments begin at the individual stock level. However, for stocks, the central column of the style box represents the core style (those stocks for which neither value or growth characteristics dominate) for funds, it represents the blend style (a mixture of growth and value stocks or mostly core stocks). Two of these categories, 'value' and 'growth,' are common to both stocks and funds. The horizontal axis defines three style categories. The vertical axis of the Style Box defines three size categories, or capitalization bands-small, mid-size, and large. The Style Box also forms the basis for Morningstar's style-based fund categories and market indexes.

Fixed income funds are classified according to credit quality (the vertical axis) and sensitivity to changes in interest rates (the horizontal axis).īy providing an easy-to-understand visual representation of stock and fund characteristics, the Morningstar Style Box allows for informed comparisons and portfolio construction based on actual holdings, as opposed to assumptions based on a fund's name or how it is marketed. For stocks and stock funds, it classifies securities according to market capitalization (the vertical axis) and growth and value factors (the horizontal axis). A proprietary Morningstar data point, the Morningstar Style Box is a nine-square grid that provides a graphical representation of the 'investment style' of stocks and mutual funds.

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