Each week, Morningstar screens the U.S.-listed stocks under its coverage for newly overvalued names, data journalist Bella Albrecht wrote in a blog post Monday.
Morningstar considers stocks with an overvalued rating of 1 or 2 stars, and for the week ended Aug. 8, 14 stocks saw their ratings change to 2 stars, while three climbed into 1-star territory.
Stocks rated 3 stars are fairly valued, according to Morningstar analysts, while those rated 4 or 5 stars are considered undervalued.
The Morningstar U.S. Market Index rose by 2.3% for the week ended Aug. 8, leaving the overall U.S. stock market hovering at a 5% premium to its fair value estimate on a cap-weighted basis, Albrecht reported.
Morningstar found that 36% of the 844 U.S. listed stocks that its analysts cover are undervalued, 42% are fairly valued and 22% are overvalued. Twenty-four are newly undervalued, and 14 are newly overvalued.
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 valued. Together, these metrics and the stock’s current price determine each stock’s Morningstar rating.
See the accompanying gallery for eight newly overvalued U.S. stocks.
(Credit: Adobe Stock)
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