2 Newly Overvalued Stocks

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

For the week ended Jan. 10, two stocks saw their Morningstar Ratings change to 2 stars, while six reached 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 two new 2-star stocks, ordered by market cap, are:

• Boston Scientific BSX
• VeriSign VRSN

The five new 1-star stocks with the largest market capitalization are:

• Arista Networks ANET
• Freeport-McMoRan FCX
• Targa Resources TRGP
• Williams-Sonoma WSM
• Saia SAIA

The full list of new 1-star stocks is at the bottom of this story. All returns in this article are reported in the stock’s base currency and all data is sourced from Morningstar Direct.

Newly Overvalued Stocks for the Week Ended Jan. 10

The Morningstar US Market Index fell 1.92% over the past week, leaving the overall US stock market moderately overvalued, hovering at a 7% premium to its fair value estimate on a cap-weighted basis.

Of the 861 US-listed stocks covered by Morningstar analysts:

• 38% are undervalued, 40% are fairly valued, and 22% are overvalued.
• Two are newly overvalued.
• 16 are newly undervalued.
• Six moved from a 2-star rating to a 1-star rating.
• None of the newly overvalued stocks jumped from a 3-star rating to a 1-star rating.
• 20 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

Boston Scientific

• Morningstar Rating: 2 stars
• One-Week Return: 4.62%

Medical devices company Boston Scientific has climbed 10.07% over the past three months and 59.44% over the past year. The stock trades at a 13% premium to its fair value estimate of $84 per share, with an Uncertainty Rating of Medium. Boston Scientific is a large-core company with a narrow economic moat.

VeriSign

• Morningstar Rating: 2 stars
• One-Week Return: 0.71%

Software infrastructure firm VeriSign has gained 10.82% over the past three months and 1.80% over the past year. The mid-growth stock has a wide economic moat. VeriSign is trading at a 6% premium to its fair value estimate of $195 per share, with an Uncertainty Rating of Low.

Metrics for this Week’s New 1-Star Stocks

Arista Networks

• Morningstar Rating: 1 star
• One-Week Return: -0.75%

Computer hardware company Arista has gained 11.62% over the past three months and 83.51% over the past year. The large-growth stock has a wide economic moat. Arista is trading at a 52% premium to its fair value estimate of $75 per share, with an Uncertainty Rating of High.

Freeport-McMoRan

• Morningstar Rating: 1 star
• One-Week Return: 3.37%

Copper company Freeport-McMoRan has dropped 21.07% over the past three months and 4.40% over the past year. The stock is trading at a 56% premium to its fair value estimate of $25 per share, with an Uncertainty Rating of High. Freeport-McMoRan is a mid-growth company with no economic moat.

Targa Resources

• Morningstar Rating: 1 star
• One-Week Return: 3.83%

Midstream oil and gas company Targa is up 19.47% over the past three months and 135.80% over the past year. The stock’s price is 43% above its fair value estimate of $135 per share, with an Uncertainty Rating of Medium. The mid-growth stock has no economic moat.

Williams-Sonoma

• Morningstar Rating: 1 star
• One-Week Return: 2.22%

Specialty retail firm Williams-Sonoma has climbed 39.52% over the past three months and 102.13% over the past year. The stock trades at a 59% premium to its fair value estimate of $124 per share, with an Uncertainty Rating of High. Williams-Sonoma is a mid-core company with no economic moat.

Saia

• Morningstar Rating: 1 star
• One-Week Return: -3.14%

Trucking company Saia is up 2.23% over the past three months and 3.37% over the past year. The stock’s price is 33% above its fair value estimate of $339 per share, with an Uncertainty Rating of Medium. The mid-growth stock has no economic moat.