Dick's Sporting Goods Makes Morningstar List of Most Overvalued Stocks

The research firm created a roster of the 10 most overvalued stocks, relative to its fair value estimates.

The S&P 500 has jumped 12% over the last three months, pushing stock valuations upward.

So it’s no surprise that as of Jan. 9, 130, or 15%, of the 847 stocks covered by Morningstar analysts were overvalued relative to the analysts’ fair value estimates. That compares to about 30%, or 253 stocks, a year ago. Utilities in particular were overvalued -- 46% of them.

Here are the 10 most overvalued Morningstar-covered stocks as of Jan. 9, starting with the most overvalued. (The numbers below are from Jan. 13).

TAL Education Group  (TAL) - Get Free Report, a tutoring service in China. Morningstar fair value estimate: $5.60. Recent price: $8.64.

Hess  (HES) - Get Free Report, an oil producer. Fair value estimate: $88. Recent price: $152.

Dick’s Sporting Goods  (DKS) - Get Free Report. Fair value estimate: $82. Recent price: $129.

Old Dominion Freight Line  (ODFL) - Get Free Report, a trucking company. Fair value estimate: $201. Recent price: $315.

Cintas  (CTAS) - Get Free Report, a uniform rental company. Fair value estimate: $292. Recent price: $449.

Church & Dwight  (CHD) - Get Free Report, the world’s largest baking soda producer. Fair value estimate: $58. Recent price: $82.

Lamb Weston  (LW) - Get Free Report, a potato products producer. Fair value estimate: $70. Recent price: $98.

Devon Energy  (DVN) - Get Free Report, an oil producer. Fair value estimate: $45. Recent price: $63.59.

O’Reilly Automotive  (ORLY) - Get Free Report, an auto parts retailer. Fair value estimate: $600. Recent price: $815.

Trane Technologies  (TT) - Get Free Report, a maker of heating/cooling systems. Fair value estimate: $129. Recent price: $183.

Hess: “The good news is already priced in,” Morningstar analyst Dave Meats wrote in a commentary. “The market apparently has rosier views on long-term commodity prices than we do.”

While he sees oil prices remaining high for 2023, he sees the Brent (European) price falling to $60 a barrel long-term from a recent price of $84.

Dick’s: “Although its sales have been very strong over the past two years, we believe a slowdown is likely, as growth in sporting goods retail has generally been minimal due to external competition,” Morningstar analyst David Swartz wrote in a commentary.

“Operating margins have already started to trend downward -- to a trailing 12-month value of 13.4% as of Oct. 31.”

Old Dominion: “I suspect the market is differing with us in terms of our mid-cycle [profit] margin forecast,” Morningstar analyst Matthew Young wrote in a commentary.

“We take a more conservative stance, not because of execution, but because LTL [less-than-truckload] shipping is a cyclical, price competitive business.”

Cintas: “Cintas has claimed that its products and services are of higher quality, but we continue to be skeptical that its offerings are indeed better enough to outcompete other industry players,” said Morningstar analyst Joshua Aguilar.

A recession could make the company suffer. Cintas is “highly cyclical,” as its core uniform segment depends on the strength of the jobs market, he said.

The author of this story owns shares of Cintas and Lamb Weston.