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. 4, three 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 three newly undervalued stocks, ordered by market cap, are:

• DraftKings DKNG
• Light & Wonder LNW
• AmeriCold Logistics COLD

All data in this article is sourced from Morningstar Direct.

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

The Morningstar US Market Index rose 0.24% over the past week, leaving the overall US stock market moderately overvalued, hovering at an 8.00% premium to its fair value estimate on a cap-weighted basis.

Of the 884 US-listed stocks covered by Morningstar analysts:

• 30% are undervalued, 43% are fairly valued, and 27% are overvalued.
• Three are newly undervalued.
• 11 are newly overvalued.
• Three moved from a 4-star rating to a 5-star rating.
• Four moved from a 5-star rating to a 4-star rating.
• 11 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 that estimate. A higher uncertainty rating equates to a larger range of stock prices that are considered fairly valued. These two metrics and the stock’s price determine its Morningstar Rating.

Metrics for this Week’s New 4-Star Stocks

DraftKings

• Morningstar Rating: 4 stars
• One-Week Return: -2.68%

Gambling company DraftKings has climbed 4.91% over the past three months and 37.06% over the past year. The stock trades at a 20% discount to its fair value estimate of $49, with a very high uncertainty rating. DraftKings is a mid-growth company with a narrow economic moat.

Light & Wonder

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

Gambling company Light & Wonder is down 10.32% over the past three months and up 35.58% over the past year. The stock’s price is 10% below its fair value estimate of $104, with a medium uncertainty rating. The small-growth stock has no economic moat.

AmeriCold Logistics

• Morningstar Rating: 4 stars
• One-Week Return: -2.82%

Industrial REIT AmeriCold has gained 5.72% over the past three months and lost 2.94% over the past year. The small-core stock has no economic moat. AmeriCold is trading at a 12% discount to its fair value estimate of $31.50, with a medium uncertainty rating.