Morningstar cites the 10 stocks it covers that were most overvalued compared to its fair value estimates as of February 24.
In today’s volatile stock market, investors can often find good bargains. But be careful: it’s just as easy to run into stocks that are overvalued.
Morning Star listed the 10 actions covers those that were most overvalued compared to their fair value estimates as of February 24.
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Keep in mind that “most of the names on this list are good companies,” wrote Susan Dziubinski, an investment specialist at Morningstar.
Seven of the companies have moats (enduring competitive advantages), according to Morningstar analysts.
“Five of the companies are led by senior managers who have a track record of skillful capital allocation and therefore receive Morningstar’s highest capital allocation rating,” Dziubinski said.
“And perhaps most notably, two of the companies (ribbons (ACTS) – Get a free reportand hershey (HSY) – Get a free report) … are also among Morningstar’s Best Companies to Own, a list featuring companies that score well on various quality-related metrics.”
That means the big companies aren’t always the ones you should buy now, Dziubinski said. “In fact, it can be a downright lousy stock to buy if it’s overvalued.”
The list
So here’s Morningstar’s list of the most overvalued stocks.
- Mettler-Toledo International (BAT) – Get a free report, a supplier of scales and scales. Morningstar Fair Value Estimate: $830, Recent Listing: $1,464, 76% above fair value.
- Old Dominion Freight Line (ODFL) – Get a free report, a trucking company. Morningstar Fair Value Estimate: $217, Recent Listing: $354, 63% above fair value.
- Dick’s Sporting Goods (dks) – Get a free report, a sporting goods retailer. Morningstar Fair Value Estimate: $82, Recent Listing: $129, 57% above fair value.
- ribbons, a uniform vendor/rental. Morningstar Fair Value Estimate: $299, Recent Listing: $435, 45% above fair value.
- church and dwight (coronary cardiopathy) – Get a free report, a producer of sodium bicarbonate. Morningstar Fair Value Estimate: $58, Recent Listing: $84, 45% above fair value.
- Idexx Laboratories (IDXX) – Get a free report, a veterinary diagnostic provider. Morningstar Fair Value Estimate: $326, Recent Listing: $477, 46% above fair value.
- Progressive (PGR) – Get a free report, the insurance company. Morningstar Fair Value Estimate: $99, Recent Listing: $142, 43% above fair value.
- whatsco (OSM) – Get a free report, distributor of air conditioning / heating products. Morningstar Fair Value Estimate: $212, Recent Listing: $308, 45% above fair value.
- Hershey, The Candy Company Morningstar Fair Value Estimate: $169, Recent Listing: $239, 41% above fair value.
- W. W. Grainger (GWW) – Get a free report, distributor of maintenance and repair products. Morningstar Fair Value Estimate: $470, Recent Listing: $682, 45% above fair value.
Dick’s: Morningstar analyst David Swartz does not assign a moat to the company. “Dick’s Sporting Goods lacks an advantage as sporting goods are sold through many channels,” he wrote in a comment.
“While its sales have been very strong over the past two years, we believe it is likely to slow as growth in sporting goods retail has been minimal overall due to outside competition.”
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Hershey: This is one of those strong companies. Morningstar analyst Erin Lash gives it a wide moat. “The resilience of Hershey’s strong mix of brands and the prudence of its strategic course were on display again in the fourth quarter, when organic sales increased 10.7%,” she wrote.
But, “investors should exercise restraint, with stocks trading at a 30-40% premium to our intrinsic valuation,” Lash said.
The author of this story owns shares of Cintas.
