The list includes stocks that beat first-quarter-earnings estimates by more than 10% and garnered moats from Morningstar analysts.
The stock market in recent days has plummeted amid weak first-quarter-earnings reports from some major companies.
But of the 868 U.S.-listed companies that Morningstar analysts cover, more than a third (37%) beat Wall Street’s profit estimates by at least 10%.
So the firm put together a list of stocks that:
· are undervalued, according to Morningstar analysts;
· are assigned a moat by Morningstar analysts, meaning they think the companies have a competitive advantage over their peers; and,
· beat Wall Street first-quarter-earnings estimates by more than 10%.
The list includes:
1. Malibu Boats (MBUU) – Get Malibu Boats, Inc. Class A Report, a power boat maker;
2. MercadoLibre (MELI) – Get MercadoLibre, Inc. Report, Latin America’s giant e-commerce marketplace;
3. Ionis Pharmaceuticals (IONS) – Get Ionis Pharmaceuticals, Inc. Report, a biotechnology company;
4. Sabre (SABR) – Get Sabre Corp. Report, an air-travel-booking service provider;
5. Tyler Technologies (TYL) – Get Tyler Technologies, Inc. Report, which provides software to government institutions;
6. Atlassian (TEAM) – Get Atlassian Corp. Plc Class A Report, a project-management-software company.
All valuations below are as of the close of trading May 19.
“Our model expects [narrow-moat] Malibu’s sales to grow 10% on average over the next decade, including acquisitions,” said Morningstar analyst Jaime Katz.
“While demand for outdoor recreational products has been elevated with social distancing measures due to the pandemic, we expect maintained sales growth stemming from market share gains and expansion into whitespace categories.”
She sees Malibu stock as 45% undervalued.
In the first quarter, “platform sales growth remained steady” for the wide-moat company, compared with three years ago, prior to the pandemic, said Morningstar analyst Sean Dunlop.
That “suggests covid-induced gains have remained sticky, an accomplishment we view as particularly impressive when juxtaposed against recent slowdowns by other e-commerce operators,” he said.
Dunlop sees the stock as 49% undervalued
“Despite other RNA-targeting technology that could compete with Ionis’s technology down the road, we continue to assign Ionis a narrow-moat rating based on the breadth and potential of its late-stage pipeline in neurology, cardiology, and rare diseases,” said Morningstar analyst Karen Andersen.
She sees the stock as 37% undervalued.
“We think investors are underappreciating [narrow-moat] Sabre’s demand opportunity and liquidity profile and see the [stock’s] pullback as an attractive entry point,” said Morningstar analyst Dan Wasiolek.
“Barring a renewed health crisis, we think business travel will continue to recover, as companies look to retain and win contracts through in-person meetings.”
He sees the stock as 53% undervalued.
“Business momentum continues [for the wide-moat company,] with growth in software subscriptions and transactional revenue and incremental signs of cross-selling success between NIC and legacy Tyler,” said Morningstar analyst Dan Romanoff. Tyler acquired NIC last year.
He sees the stock as 36% undervalued.
“We are impressed with [narrow-moat] Atlassian’s cloud migration progress and remain confident that while the rapid transition is pressuring near-term margins, the company will benefit from its investments and drive long-term profitability and revenue growth,” Romanoff said.
He sees the stock as 59% undervalued.