3 New 5-Star Stocks This Week

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Once a week, we screen the US-listed stocks under Morningstar’s coverage for newly undervalued names—those whose prices have just fallen into ranges worthy of 4- or 5-star

. For the week ended Feb. 27, 18 stocks saw their ratings change to 4 stars, while three joined the 60 US-listed names in 5-star territory.

The three new 5-star stocks, ordered by market capitalization, are:

• Alibaba Group Holding BABA
• LPL Financial Holdings LPLA
• Docusign DOCU

All returns in this article are reported in the stock’s base currency and all data is sourced from Morningstar Direct.

What Is the Morningstar Rating for Stocks?

The Morningstar Rating can help investors identify stocks that are truly undervalued or overvalued, cutting through the market noise. The rating is determined by three factors: a stock’s price, its

—Morningstar’s estimate of its intrinsic worth—and its , which captures the range of potential outcomes for that estimate. Stocks rated 4 or 5 stars are considered undervalued, those rated 3 stars are fairly valued, and the ones rated 1 or 2 stars are considered overvalued.

The Latest Stock Valuation Changes

The Morningstar US Market Index fell 0.46% over the past week as of Feb. 27, leaving the overall US stock market moderately undervalued, hovering at a 7% discount to its fair value estimate on a market cap-weighted basis.

Of the 827 US-listed stocks covered by Morningstar analysts:

• 35% are undervalued, 40% are fairly valued, and 26% are overvalued.
• 18 are newly undervalued.
• 14 are newly overvalued.
• Three moved from a 4-star rating to a 5-star rating.
• Eight moved from a 5-star rating to a 4-star rating.
• None of the newly undervalued stocks jumped from a 3-star rating to a 5-star rating.
• 13 are no longer undervalued.

Metrics for This Week’s New 5-Star Stocks

Alibaba Group Holding

• Morningstar Rating: ★★★★★
• Fair Value Estimate: $258.00
• Uncertainty Rating: High

Following a 6.69% loss over the past week, internet retail company Alibaba saw its Morningstar Rating move to 5 stars from 4. Alibaba has lost 8.56% over the past three months and has gained 7.35% over the past year. The large-core stock has a wide economic moat. Alibaba is trading at a 44% discount to its fair value estimate of $258 per share, with an Uncertainty Rating of High.

LPL Financial Holdings

• Morningstar Rating: ★★★★★
• Fair Value Estimate: $540.00
• Uncertainty Rating: High

Capital markets company LPL Financial lost 5.91% over the past week, shifting its Morningstar Rating to 5 stars from 4. LPL Financial has dropped 15.09% over the past three months and 16.67% over the past year. The stock is trading at a 44% discount to its fair value estimate of $540 per share, with an Uncertainty Rating of High. LPL Financial is a mid-growth company with a wide economic moat.

Docusign

• Morningstar Rating: ★★★★★
• Fair Value Estimate: $90.00
• Uncertainty Rating: Very High

Following a 1.33% gain over the past week, software application firm Docusign saw its Morningstar Rating move to 5 stars from 4. Docusign has lost 34.56% over the past three months and 44.55% over the past year. The small-core stock has no economic moat. Docusign is trading at a 50% discount to its fair value estimate of $90 per share, with an Uncertainty Rating of Very High.