New 4-Star Stocks

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

For the week ended Aug. 30, five stocks dropped into undervalued territory, meaning their Morningstar Ratings changed to 4 or 5 stars. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 1 or 2 stars are considered overvalued.

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

• Koninklijke Philips PHG
• SEI Investments SEIC
• Coty COTY
• Advance Auto Parts AAP
• SolarEdge Technologies SEDG

All data in this article is sourced from Morningstar Direct.

New 4-Star Stocks for the Week Ended Aug. 30

The Morningstar US Market Index rose 0.26% 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 881 US-listed stocks covered by Morningstar analysts:

• 35% are undervalued, 42% are fairly valued, and 23% are overvalued.
• Five are newly undervalued.
• 19 are newly overvalued.
• One moved from a 4-star rating to a 5-star rating.
• Two moved from a 5-star rating to a 4-star rating.
• 14 are no longer undervalued.

Morningstar analysts assign every stock under their coverage a fair value estimate, an intrinsic measure of its 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 fairly valued prices. Combined with the stock’s current price, these two metrics determine its Morningstar Rating.

Metrics for this Week’s New 4-Star Stocks

Koninklijke Philips

• Morningstar Rating: 4 stars
• 1-Week Return: 0%

Medical devices company Koninklijke Philips has gained 10.27% over the past three months and 38.06% over the past year. The large-core stock has a wide moat. Philips’ fair value estimate rose to $39 from $22 during the week. It ended the week trading at a 23% discount to its new fair value estimate, with a high uncertainty rating.

SEI Investments

• Morningstar Rating: 4 stars
• One-Week Return: 0.39%

Asset management firm SEI Investments has climbed 1.70% over the past three months and 10.18% over the past year. SEI Investments’ fair value estimate rose to $76 from $70 during the week. It ended the week trading at an 11% discount to its new fair value estimate, with a medium uncertainty rating. SEI Investments is a small-core company with a narrow economic moat.

Coty

• Morningstar Rating: 4 stars
• One-Week Return: -5.82%

Household and personal products company Coty is down 7.95% over the past three months and 18.79% over the past year. The stock’s price is 18% below its fair value estimate of $11.40, with a high uncertainty rating. The small-core stock has no moat.

Advance Auto Parts

• Morningstar Rating: 4 stars
• One-Week Return: -7.81%

Specialty retail firm Advance Auto Parts has dropped 32.06% over the past three months and 32.37% over the past year. The stock is trading at a 21% discount to its fair value estimate of $57, with a high uncertainty rating. Advance Auto Parts is a small-value company with no moat.

SolarEdge Technologies

• Morningstar Rating: 4 stars
• One-Week Return: -15.43%

Solar company SolarEdge is down 50.67% over the past three months and 85.17% over the past year. The stock’s price is 26% below its fair value estimate of $33, with a very high uncertainty rating. The small-value stock has no moat.

Newly Undervalued Stocks for the Week