Each month, we screen the Europe-listed stocks under Morningstar’s coverage for newly overvalued names.
Over the past month, seven stocks saw their Morningstar Ratings change to 2 stars, while another one 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.
For more information on the newly undervalued stocks, read our article.
The one new 1-star European stock is:
• Wise WISE
The five new 2-star European stocks with the largest market capitalization are:
• Pandora PNDORA
• ABB ABBN
• Zurich Insurance Group ZURN
• London Stock Exchange Group LSEG
• NatWest Group NWG
The full list of new 2-star stocks can be found at the bottom of this story.
Newly Overvalued Stocks as of Dec. 17
The Morningstar Europe Index rose 2.24% over the past month, leaving the overall European stock market slightly undervalued, hovering at a 5% discount to its fair value estimate on a cap-weighted basis.
Of the 255 Europe-listed stocks covered by Morningstar analysts:
• 48% are undervalued, 37% are fairly valued, and 15% are overvalued.
• Seven are newly overvalued.
• Six are newly undervalued.
• One moved from a 2-star rating to a 1-star rating.
• Among the newly overvalued stocks, zero jumped from a 3-star rating to a 1-star rating.
• Six are no longer 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.
These two metrics and the stock’s current price, are used to determine its Morningstar Rating.
Distribution of Star Ratings for Europe-Listed Stocks
Data is for Europe-listed stocks currently under analyst coverage.
Source: Morningstar Direct.
Metrics for this Month’s New 1-Star Stock
Wise WISE
• Morningstar Rating: 1 star
• One-Month Return: 18.40%
Information technology services company Wise has gained 56.31% over the past three months and 23.32% over the past year. The mid-growth stock has no economic moat. Wise is trading at a 77% premium to its fair value estimate of GBX 560, with an Uncertainty Rating of High.
Metrics for this Month’s New 2-Star Stocks
Pandora PNDORA
• Morningstar Rating: 2 stars
• One-Month Return: 15.94%
Luxury goods firm Pandora is up 7.89% over the past three months and 39.13% over the past year. The stock’s price is 25% above its fair value estimate of DKK 1,010, with an Uncertainty Rating of High. The mid-core stock has a narrow economic moat.
ABB ABBN
• Morningstar Rating: 2 stars
• One-Month Return: 4.07%
Electrical equipment and parts company ABB has climbed 8.54% over the past three months and 40.22% over the past year. The stock is trading at a 14% premium to its fair value estimate of CHF 45.50, with an Uncertainty Rating of Medium. ABB is a large-growth company with a wide economic moat.
Zurich Insurance Group ZURN
• Morningstar Rating: 2 stars
• One-Month Return: 4.20%
Diversified insurance firm Zurich Insurance has gained 7.45% over the past three months and 31.15% over the past year. The large-core stock has a narrow economic moat. The fair value estimate for Zurich Insurance rose to CHF 534 from CHF 495 during the month. It ended the month trading at a 3% premium to its new fair value estimate, with an Uncertainty Rating of Low.
London Stock Exchange Group LSEG
• Morningstar Rating: 2 stars
• One-Month Return: 8.46%
The London Stock Exchange Group is up 10.64% over the past three months and 27.06% over the past year. The fair value estimate for LSEG rose to £102.00 from £98.00 during the month. It ended the month trading at a 13% premium to its new fair value estimate, with an Uncertainty Rating of Medium. The large-growth stock has a wide economic moat.
NatWest Group NWG
• Morningstar Rating: 2 stars
• One-Month Return: 1.58%
NatWest has climbed 17.03% over the past three months and 92.62% over the past year. The bank is trading at an 11% premium to its fair value estimate of GBX 360, with an Uncertainty Rating of Medium. NatWest is a large-core company with no economic moat.
This article was generated with the help of automation and reviewed by Morningstar editors. Learn more about Morningstar’s use of automation.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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