2 Newly Overvalued Stocks this Month

Once a month, we screen the Canada-listed stocks under Morningstar’s coverage for newly overvalued names—those whose prices have just climbed into ranges warranting 1- or 2-star

. Over the past month, two stocks saw their ratings change to 2 stars, while one joined the eight Canada-listed names in 1-star territory.

The two new 2-star Canadian stocks, ordered by market capitalization, are:

• IGM Financial IGM
• AGF Management AGF.B

The new 1-star Canadian stock is:

• Teck Resources TECK.B

All returns in this article are reported in the stock’s base currency, and all data is sourced from Morningstar Direct.

What Is the Morningstar Rating for Stocks?

The Morningstar Rating can help investors identify stocks that are truly undervalued or overvalued, cutting through the market noise. The rating is determined by three factors: a stock’s price, its

—Morningstar’s estimate of its intrinsic worth—and its , which captures the range of potential outcomes for that estimate. Stocks rated 4 or 5 stars are considered undervalued, those rated 3 stars are fairly valued, and the ones rated 1 or 2 stars are considered overvalued.

The Latest Stock Valuation Changes

The Morningstar Canada Index rose 3.36% over the past month as of Aug. 18, leaving the overall Canadian stock market significantly overvalued, hovering at a 16.00% premium to its fair value estimate on a market-cap-weighted basis.

Of the 56 Canada-listed stocks covered by Morningstar analysts:

• 23% are undervalued, 23% are fairly valued, and 54% are overvalued.
• Two are newly undervalued.
• Two are newly overvalued.
• One moved from a 2-star rating to a 1-star rating.
• Three moved from a 1-star rating to a 2-star rating.
• None of the newly overvalued stocks jumped from a 3-star rating to a 1-star rating.
• Three are no longer overvalued.

Metrics for This Month’s New 2-Star Stocks

IGM Financial IGM

• Morningstar Rating: ★★
• Fair Value Estimate: C$78.00
• Uncertainty Rating: Medium

Following a 3.96% gain over the past month, asset management firm IGM saw its Morningstar Rating move to 2 stars from 3. IGM has gained 14.58% over the past three months and 88.58% over the past year. The mid-core stock has no economic moat. IGM is trading at a 13% premium to its fair value estimate of C$78 per share, with an Uncertainty Rating of Medium.

AGF Management AGF.B

• Morningstar Rating: ★★
• Fair Value Estimate: C$20.00
• Uncertainty Rating: High

Asset management firm AGF gained 0.44% over the past month, shifting its Morningstar Rating to 2 stars from 3. AGF has climbed 36.54% over the past three months and 98.47% over the past year. The stock is trading at a 15% premium to its fair value estimate of C$20 per share, with an Uncertainty Rating of High. AGF is a small-value company with no economic moat.

Metrics for This Month’s New 1-Star Stock

Teck Resources TECK.B

• Morningstar Rating: ★
• Fair Value Estimate: C$51.00
• Uncertainty Rating: High

Copper company Teck gained 15.13% over the past month, shifting its Morningstar Rating to 1 star from 2. Teck has climbed 5.54% over the past three months and 105.07% over the past year. The stock is trading at a 74% premium to its fair value estimate of C$51 per share, with an Uncertainty Rating of High. Teck is a large-core company with no economic moat.