{"id":1345,"date":"2023-01-13T10:26:21","date_gmt":"2023-01-13T10:26:21","guid":{"rendered":"https:\/\/tradersontrend.com\/?p=1345"},"modified":"2023-01-13T10:26:21","modified_gmt":"2023-01-13T10:26:21","slug":"five-of-the-most-overpriced-stocks-now","status":"publish","type":"post","link":"https:\/\/tradersontrend.com\/h\/2023\/01\/13\/five-of-the-most-overpriced-stocks-now\/","title":{"rendered":"Five of the Most Overpriced Stocks Now"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"1345\" class=\"elementor elementor-1345\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-458459bb elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"458459bb\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-430dc0a\" data-id=\"430dc0a\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-4ae787bd elementor-widget elementor-widget-text-editor\" data-id=\"4ae787bd\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.21.0 - 26-05-2024 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p>Stocks may still be in the grip of a bear market, but there are still overpriced names to avoid.<br \/><br \/>As of January 9, 2023, 15%, or 130, of the 847 U.S.-listed equities monitored by Morningstar analysts were deemed overpriced, with a Morningstar Rating of 1 or 2 stars. A year ago, around 30% of equities, or 253, were overvalued when compared to the fair value estimate established by Morningstar stock experts.<br \/><br \/>Overpriced stocks are common in certain industries, such as utilities, where 46% of Morningstar&#8217;s coverage is overvalued and another 43% is at fair value. <br \/><br \/>Overpriced stocks are notably scarcer in other sectors, such as communication services and real estate, with only 4% of communication services stocks and with 5% from the real estate sector considered expensive.<br \/><br \/>We performed a simple screen that ranked all 847 U.S.-listed stocks by their price\/fair value ratio, a data point that divides a stock&#8217;s price by its Morningstar fair value assessment, to determine the most overvalued equities covered by Morningstar. <br \/><br \/>Stocks with ratios greater than 1.0 are considered overvalued, while those with ratios less than 1.0 are considered undervalued. <br \/><br \/>The five most overvalued names on our list of US-listed coverage are:<br \/><br \/><strong><span style=\"font-size: 24.5px; font-family: inherit;\">Education Group TAL<br \/><br \/><\/span><\/strong><span style=\"font-family: inherit;\">Following painful losses in 2021 as a result of Chinese legislation <\/span><a style=\"font-family: inherit;\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2021-07-24\/china-bans-school-curriculum-tutoring-firms-from-going-public#:~:text=China%20unveiled%20a%20sweeping%20overhaul,raising%20capital%20or%20going%20public.\">restricting for-profit academic tutoring<\/a><span style=\"font-family: inherit;\"> in the country, Chinese private education services provider TAL Education Group saw its shares jump and become one of the best-performing equities of 2022. <br \/><br \/>Morningstar equities analyst Cheng Wang attributes the rally to &#8220;<\/span><em style=\"font-family: inherit;\">market speculation of a policy shift on K-9 academic after-school tutoring given the Chinese government reversed direction on the real estate industry and lifted regulation on the tech sector.<\/em><span style=\"font-family: inherit;\">&#8220;<br \/><br \/><\/span><span style=\"font-family: inherit;\">That rise propelled TAL Education from one of the most undervalued companies in early 2022 to one of the most overvalued stocks in 2023, selling at a 65% premium to its $5.60 fair value estimate.<br \/><br \/><\/span>Wang believes that the anticipated tailwinds from a prospective shift in China&#8217;s after-school tutoring policies are unjustified. <br \/><br \/>Although Wang believes that China&#8217;s regulatory environment will be more favorable to private education providers as a result of the government&#8217;s shift to an economic growth mindset, he believes that policies prohibiting for-profit K-9 academic tutoring are unlikely to be relaxed as they have been in the technology and real estate sectors. <br \/><br \/><em>&#8220;After-school tutoring is significantly less vital to China&#8217;s economy than real estate,&#8221;<\/em> he claims.<br \/><br \/>TAL Education has also already restructured its business to focus on nonacademic tutoring, learning material, and learning technology, and has spun off its K-9 academic tutoring division. <br \/><br \/><em>&#8220;Even if regulations are relaxed, TAL will not benefit unless the government permits the company to become profitable again.&#8221;<br \/><br \/><\/em><strong><span style=\"font-size: 24.5px; font-family: inherit;\">Hess<br \/><br \/><\/span><\/strong><span style=\"font-family: inherit;\">The <\/span><a style=\"font-family: inherit;\" href=\"https:\/\/www.google.com\/finance\/quote\/HES:NYSE\">shares<\/a><span style=\"font-family: inherit;\"> of oil and gas firm Hess doubled in 2022, reaching 94.1%. Higher oil prices helped boost operating margins to 33.1% in the third quarter of 2022, up from 22.8% the previous year. <br \/><br \/>Investors also praised the company&#8217;s efforts to cut expenses, contributing to broader profits.<\/span><\/p><p>&#8220;<em>Hess has done a great job restructuring the portfolio in the previous few years, pivoting to low-cost resources in the Bakken and Guyana that gained it a narrow moat rating in March 2021. With these assets, Hess has the ability to offer strong capital returns alongside significant growth,&#8221;<\/em> says David Meats, Morningstar&#8217;s director of equity research, energy, and utilities.<br \/><br \/><span style=\"font-family: inherit;\">Despite the company&#8217;s strong success, Meats feels it is one of the most overpriced stocks on Morningstar&#8217;s coverage list, selling at a 64% premium to his $88 fair value estimate.<\/span><\/p><p>&#8220;<em>We believe the good news has already been factored in. Furthermore, the market appears to be more optimistic about long-term commodity prices than we are. We agree that prices will continue high at least until 2023, but our long-term crude projection remains at $60 per barrel [for] Brent. Even though the futures strip is backward dated [prices for oil futures are normally lower than recent oil market prices], he believes it will not fall below $70 by 2030.&#8221;<br \/><br \/><\/em><strong><span style=\"font-size: 24.5px; font-family: inherit;\">Dick&#8217;s Sportswear<br \/><br \/><\/span><\/strong><span style=\"font-family: inherit;\">Dick&#8217;s Sporting Goods shares are trading at a 57% premium to their estimated fair value of $82. <br \/><br \/>Morningstar senior equities analyst David Swartz describes the sporting goods retailer&#8217;s expansion as &#8220;anomalous.&#8221; <br \/><br \/>Operating margins have more than doubled from 7.7% in 2021 to 16.5% for the fiscal year ending in January 2022.<\/span><\/p><p>&#8220;<em>Despite its very high sales over the last two years, we feel a decline is likely, given the growth in sporting goods retail has traditionally been small owing to external competition,<\/em>&#8221; Swartz adds. <br \/><br \/>Operating margins had already begun to decrease, with a trailing 12-month value of 13.4% as of Oct. 31, 2022.<\/p><p>&#8220;<em>Moreover, stocks in the activewear business remain high, which may need larger markdowns than currently anticipated<\/em>,&#8221; he warns. Margins would continue to be squeezed as a result of markdowns.<br \/><br \/><strong><a style=\"font-size: 24.5px; font-family: inherit;\" href=\"https:\/\/www.google.com\/finance\/quote\/ODFL:NASDAQ\">ODFL<\/a><br \/><br \/><\/strong><span style=\"font-family: inherit;\">Old Dominion Freight Line is a less-than-truckload (LTL) carrier that Morningstar senior equities analyst Matthew Young considers to be <\/span><em style=\"font-family: inherit;\">&#8220;the clear market leader in terms of execution, freight selection, and service quality. In addition, the company is much more lucrative than any of its publicly traded contemporaries.&#8221;<\/em><span style=\"font-family: inherit;\"> As a result, it tends to trade at a significant premium to competitors.<\/span><\/p><p>In general, stock values for trucking businesses have begun to fall in recent months as forecasts for freight demand and pricing have weakened. <br \/><br \/>Still, at a 52% premium to its $201 fair value estimate, Old Dominion Freight Line&#8217;s stock is one of the most overpriced in Morningstar&#8217;s U.S.-listed coverage list.<\/p><p><em>&#8220;I believe the market disagrees with us on our midcycle margin prediction. We adopt a more conservative approach not because of execution, but because LTL shipping is a cyclical, price competitive market,&#8221;<\/em> Young explains.<br \/><br \/><strong><span style=\"font-size: 24.5px; font-family: inherit;\">Cintas<br \/><br \/><\/span><\/strong><span style=\"font-family: inherit;\">According to Morningstar senior equity analyst Joshua Aguilar, shares of <\/span><a style=\"font-family: inherit;\" href=\"https:\/\/www.google.com\/finance\/quote\/CTAS:NASDAQ\">CTAS<\/a><span style=\"font-family: inherit;\">, the major provider of uniform rentals and sales in the United States, are around 51% overvalued relative to its $292 fair value estimate. <br \/><br \/>While the company has reported solid results, with sales increasing 10.4% in fiscal 2022 and operating margins increasing to 20.2% from 19.5% in 2021, Aguilar expects recessionary pressures and rising energy costs will stifle growth. <\/span><em style=\"font-family: inherit;\">&#8220;Natural gas and electricity, which are rising in price, account for roughly 40% of Cintas&#8217; energy expenses,&#8221;<\/em><span style=\"font-family: inherit;\"> he explains.<br \/><br \/><\/span><span style=\"font-family: inherit;\">Competition is also increasing. <\/span><em style=\"font-family: inherit;\">&#8220;While Cintas claims that its products and services are of higher quality, we remain unconvinced that its offerings are &#8216;better enough&#8217; to compete with other industry competitors.&#8221;<br \/><br \/><\/em><span style=\"font-family: inherit;\">A recession might also harm the company&#8217;s performance, which Aguilar considers &#8220;extremely cyclical&#8221; due to its primary uniform services industry being directly linked to employment trends in the United States.<br \/><br \/><\/span><em style=\"font-family: inherit;\">&#8220;Management indicated with confidence that Cintas has been able to recruit new business clients during prior recessions because the value it gives to customers stays strong,&#8221;<\/em><span style=\"font-family: inherit;\"> according to an earnings call. <br \/><br \/><\/span><em style=\"font-family: inherit;\">&#8220;However, given the uncertainty surrounding the length, severity, and aftereffects of a prospective recession in the United States and the global economy,&#8221;<\/em><span style=\"font-family: inherit;\"> Aguilar argues.<\/span><\/p><p><em>For More Stocks and Investment Related News, Click <a href=\"https:\/\/tradersontrend.com\/\">Here<\/a>.<\/em><\/p><p>\u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Stocks may still be in the grip of a bear market, but there are still overpriced names to avoid. As of January 9, 2023, 15%, or 130, of the 847 U.S.-listed equities monitored by Morningstar analysts were deemed overpriced, with a Morningstar Rating of 1 or 2 stars. A year ago, around 30% of equities,&#8230;<\/p>\n","protected":false},"author":1,"featured_media":1347,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[124,183,209,297,437,444],"class_list":["post-1345","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-newsletter","tag-cintas","tag-dicks-sportwear","tag-education-group","tag-hess","tag-odfl","tag-overpriced-stocks"],"_links":{"self":[{"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/posts\/1345","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/comments?post=1345"}],"version-history":[{"count":0,"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/posts\/1345\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/media\/1347"}],"wp:attachment":[{"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/media?parent=1345"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/categories?post=1345"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tradersontrend.com\/h\/wp-json\/wp\/v2\/tags?post=1345"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}