18 Newly Overvalued Stocks for the Week

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Each week, we screen the US-listed stocks under Morningstar’s coverage for newly overvalued names.

For the week ended Nov. 29, 18 stocks saw their Morningstar Ratings change to 2 stars, while another two climbed into 1-star territory. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 4 or 5 stars are considered undervalued.

The five new 2-star stocks with the largest market capitalization are:

• Salesforce CRM
• MercadoLibre MELI
• Zurich Insurance Group ZURVY
• American Electric Power Company AEP
• MPLX MPLX

The two new 1-star stocks, ordered by market cap, are:

• Fair Isaac FICO
• Bloom Energy BE

The full list of new 2-star stocks can be found at the bottom of this story.

Newly Overvalued Stocks for the Week Ended Nov. 29

The Morningstar US Market Index rose 1.03% over the past week, leaving the overall US stock market slightly overvalued, hovering at a 5% premium to its fair value estimate on a cap-weighted basis.

Of the 878 US-listed stocks covered by Morningstar analysts:

• 31% are undervalued, 38% are fairly valued, and 31% are overvalued.
• 18 are newly overvalued.
• Three are newly undervalued.
• Two moved from a 2-star rating to a 1-star rating.
• Among the newly overvalued stocks, none jumped from a 3-star rating to a 1-star rating.
• Five are no longer overvalued.

Morningstar analysts assign every stock under their coverage a fair value estimate, which is an intrinsic measure of the stock’s worth, and an Uncertainty Rating, which captures the range of potential outcomes for that estimate. A higher Uncertainty Rating equates to a larger range of prices considered fairly valued. These two metrics and the stock’s current price determine its Morningstar Rating.

Metrics for this Week’s New 2-Star Stocks

Salesforce

• Morningstar Rating: 2 stars
• One-Week Return: -3.52%

Software application firm Salesforce is up 28.60% over the past three months and 43.90% over the past year. The stock’s price is 14% above its fair value estimate of $290 per share, with an Uncertainty Rating of High. The large-core stock has a wide economic moat.

MercadoLibre

• Morningstar Rating: 2 stars
• One-Week Return: -0.99%

Internet retail company MercadoLibre has lost 1.52% over the past three months and gained 23.26% over the past year. The large-growth stock has a wide economic moat. MercadoLibre is trading at a 13% premium to its fair value estimate of $1,750 per share, with an Uncertainty Rating of High.

Zurich Insurance Group

• Morningstar Rating: 2 stars
• One-Week Return: 2.45%

Diversified insurance firm Zurich has climbed 8.96% over the past three months and 34.99% over the past year. The stock is trading at an 8% premium to its fair value estimate of $29.30 per share, with an Uncertainty Rating of Low. Zurich is a large-core company with a narrow economic moat.

American Electric Power Company

• Morningstar Rating: 2 stars
• One-Week Return: 2.33%

Regulated electric company American Electric has gained 1.08% over the past three months and 31.17% over the past year. The mid-value stock has a narrow economic moat. American Electric is trading at a 9% premium to its fair value estimate of $92 per share, with an Uncertainty Rating of Low.

MPLX

• Morningstar Rating: 2 stars
• One-Week Return: 4.36%

Midstream oil and gas company MPLX is up 23.36% over the past three months and 55.19% over the past year. The stock’s price is 17% above its fair value estimate of $44 per share, with an Uncertainty Rating of Medium. The mid-value stock has a narrow economic moat.

Metrics for this Week’s New 1-Star Stocks

Fair Isaac

• Morningstar Rating: 1 star
• One-Week Return: 0.84%

Software application firm Fair Isaac has climbed 38.62% over the past three months and 120.91% over the past year. The stock is trading at a 58% premium to its fair value estimate of $1,500 per share, with an Uncertainty Rating of High. Fair Isaac is a mid-growth company with a wide economic moat.

Bloom Energy

• Morningstar Rating: 1 star
• One-Week Return: 6.56%

Electrical equipment and parts company Bloom has gained 130.67% over the past three months and 91.82% over the past year. The small-growth stock has no economic moat. Bloom is trading at an 83% premium to its fair value estimate of $15 per share, with an Uncertainty Rating of Very High.