The fair value is the outcome of the valuation models based on the discounted cash flow and is Morningstar’s estimate of the intrinsic value or fair value of a company per share.
Morningstar adapts its fair value to take into account obligations or assets a company might have that are not included in the balance sheet. For instance, Morningstar lowers the fair value of a company if it has issued too many stock options or if it has an under-financed pension scheme.
Morningstar’s estimate of the fair value differs in two aspects of a target price or profit target. First of all, it is an estimate of what the company is worth, whereas a target price usually reflects what other investors might pay for the share. And secondly it is a long-term estimate, whereas profit targets are usually aimed at the next 2 to 12 months.