New 4-Star Stocks

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

For the week ended Aug. 16, two 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 two newly undervalued stocks, ordered by market cap, are:

• Dollar Tree DLTR
• LivaNova LIVN

All data in this article is sourced from Morningstar Direct.

New 4-Star Stocks for the Week Ended Aug. 16

The Morningstar US Market Index rose 3.91% over the past week, leaving the overall US stock market slightly overvalued, hovering at a 5% premium to its fair value estimate on a cap-weighted basis.

Of the 882 US-listed stocks covered by Morningstar analysts:

• 39% are undervalued, 42% are fairly valued, and 20% are overvalued
• Two are newly undervalued
• 16 are newly overvalued
• One moved from a 4-star rating to a 5-star rating
• One moved from a 5-star rating to a 4-star rating
• 16 are no longer undervalued

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

Metrics for This Week’s Newly Undervalued Stocks

Dollar Tree

• Morningstar Rating: 4 stars
• One-Week Return: 3.92%

Discount store Dollar Tree is down 18.57% over the past three months and 31.52% over the past year. The stock’s price is 14% below its fair value estimate of $115, with a high uncertainty rating. The mid-core stock has no moat.

LivaNova

• Morningstar Rating: 4 stars
• One-Week Return: 4.76%

Medical device company LivaNova has lost 26.78% over the past three months and 16.21% over the past year. The small-core stock has a narrow moat. LivaNova is trading at a 13% discount to its fair value estimate of $53, with a high uncertainty rating.