Newly Overvalued Stocks for the Week

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

For the week ended Nov. 15, 17 stocks saw their Morningstar Ratings change to 2 stars, while another eight 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:

• UnitedHealth Group UNH
• MasterCard MA
• ServiceNow NOW
• Honeywell HON
• Spotify SPOT

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

• Morgan Stanley MS
• Stryker SYK
• CRH CRH
• Waste Connections WCN
• Public Service Enterprise Group PEG

The full lists of new 1- and 2-star stocks can be found 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 Nov. 15

The Morningstar US Market Index fell 2.06% over the past week, leaving the overall US stock market moderately overvalued, hovering at a 9.00% premium to its fair value estimate on a cap-weighted basis.

Of the 882 US-listed stocks covered by Morningstar analysts:

• 32% are undervalued, 39% are fairly valued, and 28% are overvalued.
• 17 are newly overvalued.
• 25 are newly undervalued.
• Eight moved from a 2-star rating to a 1-star rating.
• Among the newly overvalued stocks, zero jumped from a 3-star rating to a 1-star rating.
• 22 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 are used to determine its Morningstar Rating.

Metrics for this Week’s New 2-Star Stocks

UnitedHealth Group

• Morningstar Rating: 2 stars
• One-Week Return: -3.83%

Healthcare plans company UnitedHealth has gained 2.54% over the past three months and 11.68% over the past year. The large-value stock has a narrow moat. UnitedHealth is trading at an 8% premium to its fair value estimate of $550, with an Uncertainty Rating of Medium.

MasterCard

• Morningstar Rating: 2 stars
• One-Week Return: -0.55%

Credit services firm MasterCard has climbed 11.49% over the past three months and 32.27% over the past year. The stock is trading at a 12% premium to its fair value estimate of $465, with an Uncertainty Rating of Medium. MasterCard is a large-core company with a wide moat.

ServiceNow

• Morningstar Rating: 2 stars
• One-Week Return: 0.33%

Software application firm ServiceNow is up 21.55% over the past three months and 55.38% over the past year. The stock’s price is 12% above its fair value estimate of $900, with an Uncertainty Rating of Medium. The large-growth stock has a wide moat.

Honeywell

• Morningstar Rating: 2 stars
• One-Week Return: 4.84%

Conglomerate Honeywell has climbed 16.58% over the past three months and 23.37% over the past year. The stock trades at a 16% premium to its fair value estimate of $197, with an Uncertainty Rating of Medium. Honeywell is a large-value company with a wide moat.

Spotify

• Morningstar Rating: 2 stars
• One-Week Return: 14.39%

Internet content company Spotify has gained 36.57% over the past three months and 163.77% over the past year. The large-growth stock has a narrow moat. The fair value estimate for Spotify rose to $390 per share from $350 during the week. It ended the week trading at an 18% premium to its new fair value estimate, with an Uncertainty Rating of High.

Metrics for this Week’s New 1-Star Stocks

Morgan Stanley

• Morningstar Rating: 1 star
• One-Week Return: 3.50%

Capital markets company Morgan Stanley has climbed 34.27% over the past three months and 74.36% over the past year. The stock trades at a 38% premium to its fair value estimate of $97, with an Uncertainty Rating of Medium. Morgan Stanley is a large-value company with a narrow moat.

Stryker

• Morningstar Rating: 1 star
• One-Week Return: 3.76%

Medical devices company Stryker has gained 16.99% over the past three months and 38.83% over the past year. The large-core stock has a wide moat. Stryker is trading at a 41% premium to its fair value estimate of $276, with an Uncertainty Rating of Medium.

CRH

• Morningstar Rating: 1 star
• One-Week Return: -2.36%

Building materials firm CRH has climbed 15.24% over the past three months and 71.05% over the past year. The stock is trading at a 33% premium to its fair value estimate of $74, with an Uncertainty Rating of Medium. CRH is a large-value company with a narrow moat.

Waste Connections

• Morningstar Rating: 1 star
• One-Week Return: -0.29%

Waste management company Waste Connections is up 0.44% over the past three months and 37.84% over the past year. The stock’s price is 27% above its fair value estimate of $144, with an Uncertainty Rating of Low. The large-growth stock has a wide moat.

Public Service Enterprise Group

• Morningstar Rating: 1 star
• One-Week Return: 3.69%

Regulated electric company Public Service Enterprise has gained 11.51% over the past three months and 46.40% over the past year. The mid-core stock has a narrow moat. Public Service Enterprise is trading at a 31% premium to its fair value estimate of $68, with an Uncertainty Rating of Low.