Three stocks identified as significantly underpriced by Morningstar:
Undervalued Value Stocks Identified by Morningstar
Morningstar analyst Susan Dziubinski claims that value stocks are currently undervalued compared to growth stocks, with a prolonged rally anticipated due to their recent underperformance. In a new article, she highlights three value stocks with significant upside potential and robust economic moats.
Campbell Soup Company
Campbell Soup Company's stock presents an attractive investment opportunity, with a potential upside of 69% and a current dividend yield of 4.17%. Dziubinski believes the company's strategic use of technology, data, and artificial intelligence to create innovations while reducing costs will help it maintain its competitive edge. Morningstar's analysis indicates a fair value estimate of $63 per share for the stock.
Danaher Corporation
Danaher Corporation, a medical technology and services company, has experienced a recent price decline, but Morningstar sees numerous growth opportunities. The company's strategic acquisitions have positioned it in attractive end markets with strong growth prospects and stable, recurring revenue streams. Although the company faces short-term headwinds, such as price pressure in China and a mild respiratory season, Morningstar expects long-term growth trends to normalize. Their fair value estimate for the stock is $270, implying a 27% upside, with a current dividend yield of 0.50%.
United Parcel Service (UPS)
The inclusion of United Parcel Service (UPS) on the list of three most interesting value stocks might come as a surprise. Despite the announcement of Amazon reducing the number of packages shipped via UPS, Morningstar believes the stock still offers long-term growth potential. Business-to-business package activity is expected to recover, and UPS is seen rationalizing network capacity in response to Amazon-induced volume reductions. Morningstar's fair value target for the UPS stock is $138, implying a 23% upside, with a high dividend yield of 5.83%.
Understanding the stocks’ better positions within their respective sectors and Morningstar's rationale for their undervaluation can help investors make informed decisions in their portfolios. For a deeper analysis of undervalued stocks, Morningstar offers its comprehensive broker comparison for finding affordable and reliable brokerage services.
While not explicitly mentioned in the original article, Morningstar's analysis also suggests several other undervalued value stocks with strong economic moats, such as Boeing, Bristol-Myers Squibb, Hershey Trust Company, Leonardo, and Coloplast (COLO B). These stocks present attractive opportunities for value-seeking investors looking for defensive qualities and strong competitive advantages.
Investors might find appealing the prospect of investing in Campbell Soup Company, given its potential upside of 69%, a current dividend yield of 4.17%, and Morningstar's belief that the company's strategic use of technology will aid in maintaining its competitive edge.
Similarly, Danaher Corporation, despite facing short-term challenges, is seen by Morningstar as offering a 27% upside due to its strategic acquisitions in attractive end markets and stable, recurring revenue streams. Another intriguing undervalued value stock, according to Morningstar, is United Parcel Service (UPS), with a 23% upside and a high dividend yield of 5.83%.
