What does the 'potential' rating do in DexNav search?

Pokemon ORAS introduced the 'DexNav' search function, which allows you to sneak up on Pokemon, sometimes with unique abilities, unique moves and a higher level than you would find normally.

While sneaking up, you get a look at some of the aforementioned values, including a 'Potential' star rating, which appears to be out of 3.

What does the potential rating signify? it doesn't seem related to the moves/ability or other values.

The "Potential" refers to the IV (Individual Values) of the Pokemon. Each star represents an IV with the max possible value (31).

Source

The official strat guide says that each star represents one perfect IV. So 3 stars means it has at least 3 31 IVs.