New 4-Star Stocks

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

For the week ended Sept. 13, a total of seven stocks dropped into undervalued territory, meaning their Morningstar Ratings changed to 4 or 5 stars over the course of the week. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 1 or 2 stars are considered overvalued.

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

• ExxonMobil XOM
• Wells Fargo WFC
• BP BP
• Ally Financial ALLY
• Aegon AEG
• Rapid7 RPD
• Core Laboratories CLB

All data in this article is sourced from Morningstar Direct.

New 4-Star Stocks for the Week Ended Sept. 13

The Morningstar US Market Index rose 4.07% over the past week, leaving the overall US stock market moderately overvalued, hovering at a 6% premium to its fair value estimate on a cap-weighted basis.

Of the 881 US-listed stocks covered by Morningstar analysts:

• 35% are undervalued, 43% are fairly valued, and 22% are overvalued.
• Seven are newly undervalued.
• 13 are newly overvalued.
• Three moved from a 4-star rating to a 5-star rating.
• Three 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, which is an intrinsic measure of the stock’s worth, and an Uncertainty Rating, which captures the range of potential outcomes for the stock’s fair value estimate. A higher Uncertainty Rating equates to a larger range of stock prices that are considered fairly valued.

These two metrics, combined with the current stock price, are used to determine a stock’s Morningstar Rating.

Metrics for This Week’s New 4-Star Stocks

ExxonMobil

• Morningstar Rating: 4 stars
• One-Week Return: -1.32%

Oil and gas firm ExxonMobil has climbed 1.82% over the past three months and dropped 1.20% over the past year. The stock is trading at an 18% discount to its fair value estimate of $135.00, with a High Uncertainty Rating. ExxonMobil is a large-value company with a narrow economic moat.

Wells Fargo

• Morningstar Rating: 4 stars
• One-Week Return: -2.26%

Diversified bank Wells Fargo has lost 7.14% over the past three months and gained 28.60% over the past year. The large-value stock has a wide economic moat. Wells Fargo is trading at a 12% discount to its fair value estimate of $60.00, with a Medium Uncertainty Rating.

BP

• Morningstar Rating: 4 stars
• One-Week Return: -0.19%

Oil and gas firm BP is down 8.21% over the past three months and 12.45% over the past year. The stock’s price is 17% below its fair value estimate of $38.20, with a High Uncertainty Rating. The large-value stock has no economic moat.

Ally Financial

• Morningstar Rating: 4 stars
• One-Week Return: -16.66%

Credit services firm Ally Financial has lost 16.51% over the past three months and gained 20.47% over the past year. The mid-core stock has no economic moat. Ally Financial is trading at a 28% discount to its fair value estimate of $46.00, with a High Uncertainty Rating.

Aegon

• Morningstar Rating: 4 stars
• One-Week Return: 0.67%

Diversified insurance firm Aegon has climbed 1.28% over the past three months and 27.36% over the past year. The stock is trading at a 12% discount to its fair value estimate of $6.80, with a Medium Uncertainty Rating. Aegon is a mid-core company with no economic moat.

Rapid7

• Morningstar Rating: 4 stars
• One-Week Return: -1.58%

Software infrastructure firm Rapid7 has lost 9.31% over the past three months and 29.17% over the past year. The small-growth stock has no economic moat. Rapid7 is trading at a 24% discount to its fair value estimate of $45.00, with a Very High Uncertainty Rating.

Core Laboratories

• Morningstar Rating: 4 stars
• One-Week Return: -3.90%

Oil and gas equipment and services company Core Laboratories is down 6.55% over the past three months and 29.99% over the past year. The stock’s price is 23% below its fair value estimate of $22.00, with a Very High Uncertainty Rating. The small-core stock has a wide economic moat.

Newly Undervalued Stocks for the Week