6 New 4-Star Stocks

Every Monday, get Morningstar’s insights on company news, the latest stock market trends, and in-depth company reports from our analysts. Sign up for our Stock Strategist newsletter here.

Each week, we screen the US-listed stocks under Morningstar’s coverage for newly undervalued names. For the week ended Jan. 24, six stocks saw their Morningstar Ratings change to 4 stars, while none dropped into 5-star territory. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 1 or 2 stars are considered overvalued.

The five new 4-star stocks with the largest market capitalization are:

• Electronic Arts EA
• Southwest Airlines LUV
• Viatris VTRS
• AES AES
• New Oriental Education & Technology Group EDU

The full list of new 4-star stocks can be found at the bottom of this story. All returns in this article are reported in the stock’s base currency and all data is sourced from Morningstar Direct.

Newly Undervalued Stocks for the Week Ended Jan. 24

The Morningstar US Market Index rose 1.73% over the past week, leaving the overall US stock market significantly overvalued, hovering at an 11% premium to its fair value estimate on a cap-weighted basis.

Of the 858 US-listed stocks covered by Morningstar analysts:

• 35% are undervalued, 37% are fairly valued, and 28% are overvalued.
• Six are newly undervalued.
• 25 are newly overvalued.
• None moved from a 4-star rating to a 5-star rating.
• Three moved from a 5-star rating to a 4-star rating.
• Among the newly undervalued stocks, none jumped from a 3-star rating to a 5-star rating.
• 18 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 prices considered fairly valuedl. These two metrics and the stock’s current price determine its Morningstar Rating.

Metrics for this Week’s New 4-Star Stocks

Electronic Arts

• Morningstar Rating: ★★★★
• One-Week Return: -17.92%

Video game company EA has dropped 19.54% over the past three months and 15.01% over the past year. Its fair value estimate was cut to $145 per share from $150 during the week. The stock ended the week trading at a 20% discount to its new fair value estimate, with an Uncertainty Rating of Medium. EA is a mid-core company with a narrow moat.

Southwest Airlines

• Morningstar Rating: ★★★★
• One-Week Return: 0.22%

Airline Southwest is up 11.44% over the past three months and 5.80% over the past year. The stock’s price is 18% below its fair value estimate of $39 per share, with an Uncertainty Rating of High. The mid-value stock has no moat.

Viatris

• Morningstar Rating: ★★★★
• One-Week Return: -0.88%

Drug manufacturer Viatris has dropped 1.56% over the past three months and 0.52% over the past year. The stock is trading at a 23% discount to its fair value estimate of $14.50 per share, with an Uncertainty Rating of Very High. Viatris is a mid-value company with no moat.

AES

• Morningstar Rating: ★★★★
• One-Week Return: -1.86%

Utilities company AES is down 30.88% over the past three months and 26.75% over the past year. The stock’s price is 17% below its fair value estimate of $14 per share, with an Uncertainty Rating of High. The small-value stock has no moat.

New Oriental Education & Technology Group

• Morningstar Rating: ★★★★
• One-Week Return: -23.21%

Education firm New Oriental has dropped 23.62% over the past three months and 38.05% over the past year. Its fair value estimate was cut to $58 per share from $62 during the week. It ended the week trading at a 19% discount to its new fair value estimate, with an Uncertainty Rating of Very High. New Oriental is a large-growth company with no moat.