New 4-Star Stocks

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

For the week ended Oct. 11, eight stocks dropped into undervalued territory, meaning their Morningstar Ratings changed to 4 or 5 stars. Stocks rated 3 stars are fairly valued, while those rated 1 or 2 stars are considered overvalued.

Those eight newly undervalued stocks, ordered by market cap, are:

• Rio Tinto RIO
• Equinor EQNR
• Roblox RBLX
• West Pharmaceutical Services WST
• Equity Lifestyle Properties ELS
• Bilibili BILI
• TIM TIMB
• Thor Industries THO

All data in this article is sourced from Morningstar Direct.

New 4-Star Stocks for the Week Ended Oct. 11

The Morningstar US Market Index rose 1.2% over the past week, leaving the overall US stock market moderately overvalued, hovering at a 9.0% premium to its fair value estimate on a cap-weighted basis.

Of the 887 US-listed stocks covered by Morningstar analysts:

• 30% are undervalued, 43% are fairly valued, and 27% are overvalued.
• Eight are newly undervalued.
• 12 are newly overvalued.
• Two moved from a 4-star rating to a 5-star rating.
• Three moved from a 5-star rating to a 4-star rating.
• Eight are no longer undervalued.

Morningstar analysts assign every stock under their coverage a fair value estimate, 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 price together determine its Morningstar Rating.

Metrics for this Week’s New 4-Star Stocks

Rio Tinto

• Morningstar Rating: 4 stars
• One-Week Return: -3.54%

Metals and mining firm Rio Tinto is up 1.60% over the past three months and 14.32% over the past year. Rio Tinto’s fair value estimate rose to $75 from $72 during the week. It ended the week trading at a 10% discount to its new fair value estimate, with a medium uncertainty rating. The large-value stock has no economic moat.

Equinor

• Morningstar Rating: 4 stars
• One-Week Return: -5.83%

Oil and gas firm Equinor has lost 2.65% over the past three months and 14.60% over the past year. The large-value stock has no economic moat. Equinor is trading at a 16% discount to its fair value estimate of $30.50, with a high uncertainty rating.

Roblox

• Morningstar Rating: 4 stars
• One-Week Return: -0.93%

Electronic gaming company Roblox has climbed 8.00% over the past three months and 30.98% over the past year. The stock is trading at a 22% discount to its fair value estimate of $53, with a very high uncertainty rating. Roblox is a mid-growth company with a narrow economic moat.

West Pharmaceutical Services

• Morningstar Rating: 4 stars
• One-Week Return: -0.54%

Medical supplies company West Pharmaceutical is down 11.46% over the past three months and 24.63% over the past year. The stock’s price is 12% below its fair value estimate of $336, with a medium uncertainty rating. The mid-core stock has a wide economic moat.

Equity Lifestyle Properties

• Morningstar Rating: 4 stars
• One-Week Return: -2.17%

Residential REIT Equity Lifestyle has gained 3.12% over the past three months and 6.58% over the past year. The mid-core stock has no economic moat. Equity Lifestyle is trading at an 11% discount to its fair value estimate of $76, with a medium uncertainty rating.

Bilibili

• Morningstar Rating: 4 stars
• One-Week Return: -17.88%

Electronic gaming company Bilibili has climbed 28.49% over the past three months and 54.54% over the past year. The stock trades at a 33% discount to its fair value estimate of $34, with a very high uncertainty rating. Bilibili is a large-growth company with no economic moat.

TIM

• Morningstar Rating: 4 stars
• One-Week Return: -6.81%

Telecom services firm TIM is down 0.91% over the past three months and up 7.14% over the past year. The stock’s price is 20% below its fair value estimate of $19, with a high uncertainty rating. The large-core stock has no economic moat.

Thor Industries

• Morningstar Rating: 4 stars
• One-Week Return: 1.09%

Recreational vehicles company Thor has climbed 12.95% over the past three months and 19.41% over the past year. The stock trades at a 20% discount to its fair value estimate of $137, with a very high uncertainty rating. Thor is a small-value company with no economic moat.