33 Undervalued US Stocks for 2025

With the market trading at a slight premium to our fair value estimate, what might that mean for 2025? “Since 2010, less than 10% of the time has the market traded at a 4% premium or more to our valuations,” writes Morningstar chief US market strategist David Sekera in his 2025 stock market outlook. “With the market trading at the high end of our fairly valued range, positioning is increasingly important.”

Here’s how stock market valuations look through two different lenses:

• By investment style, small-value stocks are the most undervalued stocks right now, trading 27% below our fair value estimate. Meanwhile, large-growth stocks are 28% overvalued.
• By sector, consumer cyclical and financial services stocks look the most overvalued. Real estate and energy stocks look the most undervalued in the new year.

33 Undervalued Stocks to Buy for 2025

Here’s the new list of Morningstar’s top underpriced stock picks for 2025.

1. A.O. Smith AOS
2. Albemarle ALB
3. Alphabet GOOGL
4. Baxter International BAX
5. Caterpillar CAT
6. Comcast CMCSA
7. Corteva CTVA
8. CVS Health CVS
9. Dollar General DG
10. Dow DOW
11. Duke Energy DUK
12. Estee Lauder EL
13. Evergy EVRG
14. Exxon Mobil XOM
15. HF Sinclair DINO
16. Healthpeak Properties DOC
17. Huntington Ingalls Industries HII
18. Kilroy Realty KRC
19. Kohl’s KSS
20. Kraft Heinz KHC
21. MarketAxess Holdings MKTX
22. Microsoft MSFT
23. Moderna MRNA
24. NXP Semiconductors NXPI
25. Paramount Global PARA
26. PayPal Holdings PYPL
27. Polaris PII
28. Schlumberger SLB
29. STMicroelectronics STMPA
30. Sun Communities SUI
31. U.S. Bancorp USB
32. Under Armour UA
33. WEC Energy WEC

Here’s a summary of how valuations stack up across sectors, along with some key Morningstar metrics about each undervalued stock to buy. Individual stock data is as of Jan. 10, 2025.

Undervalued Basic-Materials Stocks

Basic-materials stocks significantly lagged the broad market in 2024 and are slightly undervalued heading into 2025. Morningstar strategist Seth Goldstein reports that more than 50% of the stocks that Morningstar covers in the sector are trading with Morningstar Ratings of 4- or 5-stars. While building-materials stocks look overvalued, more than half the stocks in the agriculture, metals and mining, and chemicals industries are underpriced.

Underpriced Communications-Services Stocks

The communication-services sector outperformed the broad market in 2024. The sector enters 2025 trading just 5% below our fair value estimate. There is still plenty of opportunity in the sector, observes Morningstar sector director Mike Hodel. In particular, nearly three fourths of the stocks we cover in the telecom subsector are trading in the 4- and 5-star range.

Cheap Consumer Cyclical Stocks Today

Consumer cyclical stocks kept pace with the market in 2024. The sector enters 2025 trading 19% above our fair value estimate. Less than half the stocks that we cover in the sector are trading in the 4- and 5-star range, says Morningstar sector director Erin Lash. The auto, apparel, and travel industries hold the most opportunities from a valuation perspective.

Undervalued Stocks in the Consumer Defensive Sector

Consumer defensive stocks lagged the market last year. The sector looks 8% overvalued heading into the new year. Yet, there are opportunities to be found, says Morningstar’s Lash. In particular, we think the alcoholic beverage industry remains especially undervalued.

Underpriced Energy Stocks Right Now

Energy stocks significantly underperformed the broader market during 2024. OPEC faces supply decisions in 2025 as weak global demand persists, says Morningstar director Josh Aguilar. The energy sector looks about 10% undervalued today. All of the names we cover in the integrated oil and gas industry look undervalued.

Undervalued Stocks: Financial Services

The financial-services sector outpaced the broad market last year, and the sector is 10% overvalued at the start of 2025. “If the yield curve steepens more or stays steep longer than the market anticipates without the US falling into a recession, then there could be further upside to the financials sector,” notes Morningstar sector director Michael Wong.

Top Cheap Healthcare Stocks

Healthcare stocks badly lagged the market last year and as a group are trading 8% below our fair value estimate. All of the stocks in the healthcare plan industry look undervalued, reports Morningstar strategist Karen Andersen. And more than half the biotech and drugmaker stocks we cover are undervalued, too.

Inexpensive Industrials Stocks

Industrials stocks underperformed the broader market in 2024 and look 5% overvalued today. Morningstar sector director Brian Bernard reports that about half the stocks in the farm and heavy construction machinery industry look undervalued, as do some aerospace and defense stocks.

Overlooked Real Estate Stocks to Buy

Real estate stocks significantly lagged the broad market in 2024 and trade 11% below our fair value. More than half the names in the sector are trading in either the 4- or 5-star range, says Morningstar senior equity analyst Kevin Brown. Interest-rate movements continue to drive the sector’s performance.

Undervalued Tech Stocks for 2024

Technology stocks soared in 2024, outperforming the broad market. The tech sector looks 7% overvalued heading into the new year. Morningstar senior equity analyst Dan Romanoff says there are a few but not many buying opportunities in the sector. We remain confident in secular tailwinds in tech, including cloud computing, artificial intelligence, and the long-term expansion of semiconductor demand, he adds.

Underpriced Stocks: Utilities

Utilities stocks kept pace with the market in 2024; the sector is 7% overvalued at the start of 2025. “We think investors should prepare for more-pedestrian returns from utilities in 2025 and beyond,” say Morningstar strategists Travis Miller and Andrew Bischof: Utilities’ annualized return during the past three years is 8%, which is the same as the sector’s 40-year average annual return and what Miller and Bischof think investors should expect.

How to Find Undervalued Stocks to Buy

Undervalued stocks are those that trade below what they’re worth. Investors can turn to several metrics to gauge a stock’s worth. Some investors use standard metrics, such as price/earnings or price/cash flow. Others may look at a stock’s price relative to a company’s future growth prospects, or where a stock is trading relative to its 52-week high price.

At Morningstar, we define undervalued stocks as those that are trading below our calculated fair value estimate, adjusted for what we call uncertainty—both of which are wrapped into the Morningstar Rating for stocks. Stocks rated 4- and 5-stars are undervalued; those rated 3-stars are fairly valued; and those rated 1- or 2-stars are overvalued.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk