3 New 5-Star Stocks This Week

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Once a week, we screen the US-listed stocks under Morningstar’s coverage for newly undervalued names—those whose prices have just fallen into ranges worthy of 4- or 5-star

. For the week ended July 24, 12 stocks saw their ratings change to 4 stars, while three joined the 83 US-listed names in 5-star territory.

The three new 5-star stocks, ordered by market capitalization, are:

• ServiceNow NOW
• Tyler Technologies TYL
• Celanese CE

All returns in this article are reported in the stock’s base currency, and all data is sourced from Morningstar Direct.

What Is the Morningstar Rating for Stocks?

The Morningstar Rating can help investors identify stocks that are truly undervalued or overvalued, cutting through the market noise. The rating is determined by three factors: a stock’s price, its

—Morningstar’s estimate of its intrinsic worth—and its , which captures the range of potential outcomes for that estimate. Stocks rated 4 or 5 stars are considered undervalued, those rated 3 stars are fairly valued, and the ones rated 1 or 2 stars are considered overvalued.

The Latest Stock Valuation Changes

The Morningstar US Market Index fell 0.6% over the past week as of July 24, leaving the overall US stock market moderately undervalued, hovering at an 8.0% discount to its fair value estimate on a market-cap-weighted basis.

Of the 880 US-listed stocks covered by Morningstar analysts:

• 35% are undervalued, 42% are fairly valued, and 23% are overvalued.
• 12 are newly undervalued.
• 10 are newly overvalued.
• Three moved from a 4-star rating to a 5-star rating.
• Five moved from a 5-star rating to a 4-star rating.
• None of the newly undervalued stocks jumped from a 3-star rating to a 5-star rating.
• Seven are no longer undervalued.

Metrics for This Week’s New 5-Star Stocks

ServiceNow NOW

• Morningstar Rating: ★★★★★
• Fair Value Estimate: $165.00
• Uncertainty Rating: High

Software application firm ServiceNow dropped 4.32% over the past week, bumping its Morningstar Rating to 5 stars from 4. The company’s stock is up 9.55% over the past three months and is down 50.42% over the past year. The stock’s price is 40% below its fair value estimate of $165 per share, with an Uncertainty Rating of High. The large-core stock has a narrow economic moat.

Tyler Technologies TYL

• Morningstar Rating: ★★★★★
• Fair Value Estimate: $500.00
• Uncertainty Rating: High

Software application firm Tyler lost 7.00% over the past week, shifting its Morningstar Rating to 5 stars from 4. Tyler has dropped 13.12% over the past three months and 46.93% over the past year. The stock is trading at a 41% discount to its fair value estimate of $500 per share, with an Uncertainty Rating of High. Tyler is a small-core company with a wide economic moat.

Celanese CE

• Morningstar Rating: ★★★★★
• Fair Value Estimate: $95.00
• Uncertainty Rating: Very High

Following a 1.60% gain over the past week, chemical company Celanese saw its Morningstar Rating move to 5 stars from 4. Celanese has lost 28.54% over the past three months and 18.50% over the past year. The small-value stock has a narrow economic moat. Celanese is trading at a 51% discount to its fair value estimate of $95 per share, with an Uncertainty Rating of Very High.