2 Newly Undervalued Stocks this Month

Once a month, we screen the Canada-listed stocks under Morningstar’s coverage for newly undervalued names—those whose prices have just fallen into ranges worthy of 4- or 5-star

. Over the past month, two stocks saw their ratings change to 4 stars, while none joined the four Canada-listed names in 5-star territory.

The two new 4-star Canadian stocks, ordered by market capitalization, are:

• RB Global RBA
• West Fraser WFG

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 4.21% over the past month as of Aug. 17, 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.
• Zero moved from a 4-star rating to a 5-star rating.
• One moved from a 5-star rating to a 4-star rating.
• None of the newly undervalued stocks jumped from a 3-star rating to a 5-star rating.
• Four are no longer undervalued.

Metrics for This Month’s New 4-Star Stocks

RB Global RBA

• Morningstar Rating: ★★★★
• Fair Value Estimate: C$142.00
• Uncertainty Rating: Medium

Specialty business services firm RB Global dropped 27.17% over the past month. The company’s stock is down 18.57% over the past three months and 27.39% over the past year. The stock’s fair value estimate rose to C$142 per share from C$140 during the month. It ended the month trading at a 20% discount to its new fair value estimate, with an Uncertainty Rating of Medium. The mid-core stock has a narrow economic moat.

West Fraser WFG

• Morningstar Rating: ★★★★
• Fair Value Estimate: C$116.00
• Uncertainty Rating: High

Lumber and wood production company West Fraser lost 3.75% over the past month. West Fraser has climbed 16.80% over the past three months and has dropped 5.85% over the past year. The stock’s fair value estimate rose to C$116 per share from C$110 during the month. It ended the month trading at an 18% discount to its new fair value estimate, with an Uncertainty Rating of High. West Fraser is a mid-value company with no economic moat.