Every week, we take a look at US-listed stocks within Morningstar’s coverage to find those that have recently become undervalued—essentially, those whose prices have dipped into the 4- or 5-star rating ranges. For the week ending October 2, a total of 26 stocks were newly rated as 4 stars, while nine joined the current 74 stocks receiving a 5-star rating.
Among the new 5-star stocks with the highest market caps are:
- Deutsche Telekom (DTEGY)
- Mondelez International (MDLZ)
- Boston Scientific (BSX)
- DTE Energy (DTE)
- Fair Isaac (FICO)
The complete list of new 5-star stocks is provided at the end of this article. All returns mentioned are in the stocks’ base currency, with data sourced from Morningstar Direct.
Understanding the Morningstar Rating for Stocks
The Morningstar Rating serves as a tool for investors to pinpoint truly undervalued or overvalued stocks, helping to mute the noise of the market. It’s based on three main elements: a stock’s price, Morningstar’s estimate of its intrinsic worth, and the uncertainty around that estimate. Stocks scoring 4 or 5 stars are classified as undervalued, those with a 3-star rating are seen as fairly valued, and stocks rated 1 or 2 stars are viewed as overvalued.
Recent Changes in Stock Valuation
The Morningstar US Total Market Index saw a decline of 0.24% over the week as of October 2, indicating that the broader US stock market remains moderately undervalued and sits at a 7.00% discount to its fair value estimate, based on market capitalization.
Among the 868 US stocks covered by Morningstar analysts:
- 46% are classified as undervalued, 36% fairly valued, and 18% overvalued.
- 26 stocks are newly undervalued.
- Three stocks have shifted to being overvalued.
- Nine stocks were upgraded from 4 stars to 5 stars.
- One stock was downgraded from a 5-star rating to a 4-star rating.
- No newly undervalued stocks moved from a 3-star rating to a 5-star rating.
- Six stocks are no longer considered undervalued.
Details on This Week’s New 5-Star Stocks
Deutsche Telekom (DTEGY)
- Morningstar Rating: ★★★★★
- Fair Value Estimate: $44.00
- Uncertainty Rating: Medium
Deutsche Telekom, a major player in telecom services, saw a decline of 3.50% this past week, prompting its rating to rise to 5 stars from 4. Despite a 4.07% increase over the last three months, the stock has fallen by 9.53% over the past year and is currently priced at a 32% discount to its fair value of $44 per share, with a Medium uncertainty rating.
Mondelez International (MDLZ)
- Morningstar Rating: ★★★★★
- Fair Value Estimate: $77.00
- Uncertainty Rating: Low
Mondelez, the confectionery giant, experienced a 2.55% loss this past week, which adjusted its rating up to 5 stars. The stock has decreased by 3.61% over the past three months and 2.41% over the past year. Currently, it’s trading at a 24% discount to its fair value of $77 per share, with a Low uncertainty rating.
Boston Scientific (BSX)
- Morningstar Rating: ★★★★★
- Fair Value Estimate: $64.00
- Uncertainty Rating: Medium
Boston Scientific, a company specializing in medical devices, fell by 3.01% this week, resulting in a rating upgrade to 5 stars. Over the past three months, its stock has decreased by 5.63% and plummeted by 55.73% over the last year, leading to a current price that is 33% beneath its fair value estimate of $64 per share, with a Medium uncertainty rating.
DTE Energy (DTE)
- Morningstar Rating: ★★★★★
- Fair Value Estimate: $157.00
- Uncertainty Rating: Low
With a gain of 2.48% this past week, DTE Energy’s rating climbed to 5 stars. The stock has experienced an 18.47% decrease over the last three months and is down 7.57% year-over-year. It’s currently at a 21% discount to its fair value of $157 per share, carrying a Low uncertainty rating.
Fair Isaac (FICO)
- Morningstar Rating: ★★★★★
- Fair Value Estimate: $1,140.00
- Uncertainty Rating: High
Fair Isaac, known for its software applications, saw a significant drop of 23.39% this past week. The stock’s price is down 47.97% over the last three months and 62.95% year-over-year. Its fair value estimate has been reduced from $1,250 to $1,140 per share. It’s currently trading at a 42% discount to this estimate and has a High uncertainty rating.
