Market Risks Flagged
Analysts flag risks across sixteen stocks as Apple and Wynn face new warnings.
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Key Points
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Morningstar reported that the U.S. Total Market Index rose 0.11% in the week ending Sept. 4; among 880 covered U.S.-listed stocks, 33% were undervalued, 46% fairly valued and 21% overvalued.
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Apple’s Morningstar rating fell from three stars to two after a 0.08% weekly gain. The stock was trading at a 12% premium to Morningstar’s $285 fair-value estimate, despite retaining a wide economic moat and a medium uncertainty rating.
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StockStory said Park-Ohio’s share issuance over the past two years reduced earnings per share by 8% annually, while its five-year free-cash-flow margin was negative 0.9%.
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StockStory highlighted Wynn Resorts’ net debt-to-EBITDA ratio of five times, arguing that the leverage could force the casino operator to raise capital on unfavorable terms if market conditions deteriorate.
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Among the less-popular stocks it reviewed, StockStory projected Upwork’s sales would decline 8.8% over the next 12 months, while Trustmark’s earnings per share had grown only 3.9% annually over the preceding five years.
Analysts at Morningstar and StockStory are raising red flags on 16 stocks across major U.S. indexes. Morningstar downgraded Apple and John Deere to two-star ratings after their stock prices climbed above fair-value estimates. Meanwhile, StockStory flagged companies like Wynn Resorts, Tapestry, and Upwork as risky bets, citing weak cash flow, high debt, and slowing revenue growth.
The broader U.S. stock market remains moderately undervalued overall. According to Morningstar's analysis of 880 U.S.-listed stocks, 33% are undervalued, 46% fairly valued, and 21% overvalued. But investors should dig deeper than headline valuations and profitability numbers to find truly safe bets.
Apple and John Deere Lose Their Discount Status
Apple fell from three stars to two stars at Morningstar after a tiny 0.08% weekly gain pushed the stock above fair value. The tech giant now trades at a 12% premium to Morningstar's $285 fair-value estimate. Despite retaining a wide economic moat and medium uncertainty rating, the valuation no longer offers a margin of safety for new buyers.
John Deere faced the same downgrade after rising above its analyst fair-value estimate. Both stocks showed how quickly momentum can erase a value opportunity. Investors chasing these names risk overpaying for mature, competitive businesses.
Wynn Resorts and Casinos Crushed by Debt Levels
StockStory flagged Wynn Resorts for excessive leverage. The casino operator carries net debt equal to five times its annual EBITDA — a measure of cash-generating ability. This heavy load could force Wynn to raise capital on unfavorable terms if the market turns sour or travel demand weakens.
Tapestry, another StockStory concern on the S&P 500, faces similar structural headwinds. High leverage limits a company's flexibility during downturns and can destroy shareholder value if operations stumble.
Russell 2000 Stocks Show Hollow Earnings and Negative Cash Flow
StockStory highlighted Park-Ohio as a Russell 2000 warning. Share issuance over two years cut earnings per share by 8% annually. More damning: the company's five-year free-cash-flow margin was negative 0.9%, meaning it destroys cash rather than generating it.
Texas Capital Bancshares also drew scrutiny from StockStory. Banks with weak balance sheets and limited capital generation face structural headwinds in a competitive financial sector.
Unpopular Stocks Hide Troubling Growth and Leverage Risks
StockStory warned that low-profile names like Upwork and Trustmark carry hidden dangers. Upwork's sales are projected to drop 8.8% over the next 12 months. Trustmark's earnings per share grew only 3.9% annually over the past five years — too slow to justify holding a mature business.
Kyndryl and FTI Consulting appear profitable on the surface but show weakening returns on capital. StockStory stressed that investors must look beyond headline profit margins and examine whether companies can sustain their competitive advantages and generate growing cash returns.
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