16 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. 25, a total of 16 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.

The 10 newly undervalued stocks with the largest market capitalization are:

• Merck MRK
• Sanofi SNY
• Cigna Group CI
• Dassault Systemes DASTY
• Swiss Re SSREY
• Agilent Technologies A
• MongoDB MDB
• Icon ICLR
• Southwest Airlines LUV
• Aviva AVVIY

All data in this article is sourced from Morningstar Direct.

New 4-Star Stocks for the Week Ended Oct. 25

The Morningstar US Market Index fell 1.1% over the past week, leaving the overall US stock market moderately overvalued, hovering at an 8.0% premium to its fair value estimate on a cap-weighted basis.

Of the 888 US-listed stocks covered by Morningstar analysts:

• 31% are undervalued, 42% are fairly valued, and 27% are overvalued.
• 16 are newly undervalued.
• Four are newly overvalued.
• Five moved from a 4-star rating to a 5-star rating.
• One moved from a 5-star rating to a 4-star rating.
• Six are no longer undervalued.

Morningstar analysts assign every stock under their coverage a fair value estimate, which is an intrinsic measure of its worth, and an Uncertainty Rating, which captures the range of potential outcomes for that estimate. A higher rating equates to a larger range of stock prices considered fairly valued. These two metrics and the stock’s price determine its Morningstar Rating.

Metrics for this Week’s New 4-Star Stocks

Merck

• Morningstar Rating: 4 stars
• One-Week Return: -4.34%

Drug manufacturer Merck is down 16.84% over the past three months and up 3.00% over the past year. The stock’s price is 13% below its fair value estimate of $120, with an Uncertainty Rating of Medium. The large-value stock has a wide moat.

Sanofi

• Morningstar Rating: 4 stars
• One-Week Return: -1.07%

Drug manufacturer Sanofi has climbed 2.34% over the past three months and 6.64% over the past year. The stock trades at an 11% discount to its fair value estimate of $61, with an Uncertainty Rating of Medium. Sanofi is a large-core company with a wide moat.

Cigna Group

• Morningstar Rating: 4 stars
• One-Week Return: -5.70%

Healthcare company Cigna is down 6.77% over the past three months and up 6.04% over the past year. The stock’s price is 13% below its fair value estimate of $366, with an Uncertainty Rating of Medium. The large-value stock has a narrow moat.

Dassault Systemes

• Morningstar Rating: 4 stars
• One-Week Return: -6.02%

Software application firm Dassault has lost 7.15% over the past three months and 13.54% over the past year. The large-growth stock has a wide moat. Dassault is trading at a 15% discount to its fair value estimate of $40, with an Uncertainty Rating of Medium.

Swiss Re

• Morningstar Rating: 4 stars
• One-Week Return: -4.53%

Reinsurance company Swiss is up 5.67% over the past three months and 26.27% over the past year. The stock’s price is 13% below its fair value estimate of $37.20, with an Uncertainty Rating of Medium. The large-core stock has no moat.

Agilent Technologies

• Morningstar Rating: 4 stars
• One-Week Return: -6.22%

Diagnostics and research firm Agilent has lost 3.39% over the past three months and gained 26.77% over the past year. The mid-core stock has a wide economic moat. Agilent is trading at a 14% discount to its fair value estimate of $151, with an Uncertainty Rating of Medium.

MongoDB

• Morningstar Rating: 4 stars
• One-Week Return: -2.47%

Software infrastructure firm MongoDB is up 4.87% over the past three months and down 18.40% over the past year. The stock’s price is 19% below its fair value estimate of $330, with an Uncertainty Rating of High. The mid-growth stock has no moat.

Icon

• Morningstar Rating: 4 stars
• One-Week Return: -25.95%

Diagnostics and research firm Icon has dropped 29.58% over the past three months and 2.14% over the past year. The stock is trading at an 18% discount to its fair value estimate of $268, with an Uncertainty Rating of Medium. Icon is a mid-core company with a narrow moat.

Southwest Airlines

• Morningstar Rating: 4 stars
• One-Week Return: -5.00%

Airline Southwest has gained 5.45% over the past three months and 27.70% over the past year. The mid-value stock has no moat. Southwest’s fair value estimate rose to $39 from $34 during the week. It ended the week trading at a 25% discount to its new fair value estimate, with an Uncertainty Rating of High.

Aviva

• Morningstar Rating: 4 stars
• One-Week Return: -6.16%

Diversified insurance firm Aviva has dropped 2.82% over the past three months and climbed 33.33% over the past year. The stock is trading at a 16% discount to its fair value estimate of $14.40, with an Uncertainty Rating of Medium. Aviva is a large-value company with no moat.