5 Stocks to Buy While They’re Still Reasonably Priced I July 27, 2026

[00:00:00] Susan Jabinski: hello and welcome to the morning filter podcast i'm susan jabinski with morningstar every monday before market open i sit down with morningstar chief u.s market strategist dave sakara to talk about what's been going on in the market what investors should have on their radars for the week some new morningstar research and a few stock ideas now we have one programming note this week we dropped a bonus episode of the morning filter last thursday dave and morningstar chief economist preston caldwell shared their outlooks for the economy and for the market for the remainder of the year so if you haven't done so already tune in wherever you get your podcasts all right good morning dave we haven't talked about oil prices in a while and kind of been on a little bit of a roller coaster with them the past week to say the least so where are we this morning in terms [00:01:13] Dave Sakara: of oil prices good morning susan yeah no definitely a lot of volatility going on still in the oil markets and i think we've seen this exact same setup multiple times over the past couple of months essentially during the week there's a military action there's a retaliation retaliation to the retaliation and so forth but then it always seems like sunday evening before futures open you know there's some headlines out there some positive news each side agreed to de-escalation so i think what we see is each side kind of wants to go right up to that point right up to that line in the sand but neither side is willing to cross that line so this morning oil's coming back down it's down quite a bit last i checked oil was at 83 a barrel so that's down from the low 90s where we were last week so if you can maybe wait a couple days to fill up the gas tank i think you'll be able to save a couple of bucks but at the end of the day we're still you know 40 percent higher in the oil markets than where we were [00:02:11] Susan Jabinski: pre-conflict so then given that dave are you concerned about oil prices today and what would [00:02:17] Dave Sakara: you expect the market impact to be i would say towards the end of the last week i was getting more concerned about the rate of increase in oil prices but certainly not to the point that i was panicking you know at any one point in time so when i'm thinking about how oil impacts you know consumers the economy and then the markets there's really four different ways that i'm thinking about it so first and foremost the most concerning aspect is the rate of increase because if anything else you know the faster oil prices go up the more negatively it's going to impact the consumer because of course it just takes time to adjust to those higher prices secondly of course higher oil prices will cause inflation that then impacts monetary policy at least in the short term so if oil goes up too much causes inflation that's going to cause the fed to hike rates which of course then you know is negative for the markets if we have tightening monetary policy third i think about it as far as terms of like the absolute level at what level of oil prices and gasoline prices does that then cause demand destruction in the economy i want to put this in a little bit of perspective it used to be historically everyone always talked about a hundred dollar barrel oil really being that inflection point where it's going to start to negatively impact the economy and consumers but when you think about inflation over the past decade or so you know that hundred dollar oil back then is not the same as hundred dollar oil today in fact if you use the cpi calculator which as an asides i think probably underestimates inflation you know 100 oil in 2014 would be 140 today or 100 of oil in 20 or 2008 would be 150 today and then lastly i think about gasoline as a percentage of disposable spending so it's currently two percent of disposable spending right now is spent on gasoline you know back in 2008 the last time we really had kind of that energy shock it was four percent so it'd need to double just to get back to where it was back then so in my mind i think oil would need to go a lot higher and then it would also have to stay there before it makes really kind of any difference in the medium-term outlook [00:04:25] Susan Jabinski: and now we have a fed meeting you mentioned the fed coming up later this week so what's the market expecting in terms of you know any rate hike yeah personally i think it's going to be another [00:04:34] Dave Sakara: non-event i expect that they're going to talk tough on inflation you know that they're keeping a close eye on it they'll hike rates if they need to looks like the market's pricing in a 30 probability of a rate hike i don't think it's going to happen i think that's probably too high of a probability for a rate hike this time around but looking forward you know you have to remember there's no meeting in august so the next meeting isn't until mid-september looks like according to the calendar it's september 15th and 16th at that point in time the market's pricing in an 80 probability of a rate hike who knows maybe but in my mind i think we just have to see what the data is and really what the world looks like then to see when and if the fed hikes rates my guess based on what i see today i think it's probably later in the year than september but just my own opinion all right and september is [00:05:24] Susan Jabinski: a ways away so um in the meantime we have some heavy hitters coming out with earnings this week but before we get to them dave walk us through how morningstar thinks about quarterly earnings and how that might be different from other analysts in the media yeah at the end of the day we don't try [00:05:40] Dave Sakara: and play the quarterly you know earnings per share game our analysts certainly have their own quarterly forecasts but we don't publish them in my mind i think it's really kind of non-meaningful if you have any one individual quarter you know company beat or miss you know by a couple of pennies that in and of itself really doesn't tell you anything now you always have to remember too you know companies manage wall street expectations you know they put their guidance out there for the most part and then they will talk to the wall street analysts to try and help the wall street analysts you know get to a relatively narrow range of where the consensus for earnings are and they always try and set it up so that they can beat that consensus by a couple of pennies you know in order to try and make themselves look good i always find that the media overly focuses on those beats and misses essentially because i think it's just easy for them to write you know clickbait headlines to try and drive views but in those kind of articles there's really no real analysis as far as why they either you know beat or miss those earnings so when i think about earnings and the way that we look at earnings it's really much more looking at them as being a guide our earnings results tracking to our forecasts and this you know really telling us whether or not our longer term investment thesis and forecasts are still sound now if there is a a beat or a miss that's the time to then re-evaluate what those forecasts are and your thesis both whether you know it's to the upside or to the downside and that's when you start getting more meaningful changes in fair value when you then have to kind of go back and re-evaluate you know those those forecasts because again those longer term forecasts are going to make much bigger changes in what we think the fair value of a company is today and then depending on whether or not we make that fair value change or whether we hold our fair value if we don't really think there is a big change to the valuation of the company that's when you start getting those larger discrepancies away from fair value whether to the upside in which case that's probably a good time to take some profit or conversely if you get you know a big downside gap and we're holding our fair value study that's a good time probably to start dollar [00:07:48] Susan Jabinski: cost averaging in more to the downside well we have mega caps microsoft meta and amazon reporting this week and they're all you know pretty much ai stories these days um all three of those stocks look undervalued according to morningstar as we're heading into earnings so what are you going to be listening [00:08:05] Dave Sakara: for in general from this group i think the biggest change in the market right now is how people are thinking about the ai story so it's really no longer just about who can spend the most capex the fastest but increasingly it's becoming more and more about who's actually showing how they're monetizing it and the timing of that monetization so as far as capex spending goes you know still want to listen are they still ramping up capex spending if so by how much and for how long but i think the question is now at the stage of the ai story are we now at the part of the story where capex spending if it's increasing is now starting to get punished so for example we saw alphabet you know that stock sold off after their earnings and they had talked about increasing their capex spending and second of all we got monetization so i think the market is becoming very focused on both the external and the internal use cases the external use case of course is you know what exactly are they selling to their clients externally so for example you have cloud hosting now that's a business that's still depending on the company growing well over 30 percent we still think cloud hosting is capacity constrained so in our mind we still think that there's very elevated levels of capex spending yet to come a long runway for future growth there but we'll see we now have meta entering that space they're a new competitor so i think we're going to listen very closely for you know exactly how much compute are they planning on spending and what they're charging for compared to the other big hyperscalers now as far as internal monetization goes you know taking a look at some of my notes here you know microsoft i think it's all about their own ai models you know the adoption of using those models and the monetization for that you know internally with meta of course it's always still all about ad sales it's just the amount of improvement that you're getting from utilizing artificial intelligence and the amount of automation that they can put in there in order to drive those ad sales you know even higher and amazon i think it's a combination of both so of course it's about ad sales that's really a high margin portion of their business but again how much can ai help drive more and more retail sales i think there's going to be an increased focus on margins and i think there's an also a focus on really the road map for margins so with all this capex spending we've had for the past call 18 to 24 months you know people are trying to figure out when does depreciation expense materially start ramping up and are they going to have enough revenue and be able to drive that revenue enough here in the short term to offset that depreciation expense you know as it starts to roll through their income statement and then lastly i think a much bigger focus on free cash flow so what we saw with alphabet last week is they are actually going to be free cash flow negative you know this year maybe even next year so the question there is going to be for all of these companies just how negative is free cash flow going to be of course if they have negative free cash flow to be able to spend as much on capex as they're planning on they're going to have to go to the bond markets and do you know more and more new issues there so the question is you know how long are they going to be free cash flow negative four before we see free cash flow become [00:11:17] Susan Jabinski: positive once again now apple also reports this week morningstar assigns apple a 290 fair value estimate it's trading a bit above that and it's been doing pretty well apple stock lately so what are you [00:11:30] Dave Sakara: going to want to hear about here i think apple will probably be the least interesting of the mega caps next week you know i know some of the things we'll be listening for is just more details on the impact of higher and higher memory prices what that's going to do to their operating margins you know this past quarter in the next couple of quarters i think we need to hear a discussion on the impact of cell phone prices you know whether or not there's a pull forward effect you know so for example like i think there's a lot of people like me that still have you know the old iphone 12 or even older models so for example are people going to end up deciding you know what i'm going to go ahead and trade in for the iphone 17 now before prices start going up this fall for the iphone 18. so if we have that pull forward you know what does that mean for the next couple of quarters with apple i still think we need a better discussion of what they think that the ai use cases are going to be now apple itself has steered clear of really this capex spending on the ai build-up boom which i think will probably serve them well over the longer term but for now we're still not really understanding what that killer case is for ai that's going to drive you know a lot of new economic value for individual users like myself [00:12:44] Susan Jabinski: all right well seagate technology reports this week stocks up triple digits this year trades well above our 680 dollar fair value estimate so looks like a good deal of price risk with this stock depending on where you know where earnings come out is that fair to say yeah and i think this is really an [00:13:02] Dave Sakara: indicator for like all of these commodity oriented technology hardware companies and we've talked about not just this company but all of these companies have done the same thing you know the market's focus really has switched over the past call it six to nine months you know to these companies because there's huge shortages you know for their products and so therefore they can charge whatever they want to charge we're seeing their operating margins you know skyrocket but the real question is how long are these shortages going to last until either one new capacity is brought online that satisfies that demand or two when will the rate of demand begin to slow so if the hyperscalers start to lighten off you know the pressure on the accelerator so even if you know the rate of increase i'm sorry actually if i think about it if the dollar amounts are still increasing but they're going up at a slower rate of increase i think that's going to be a negative you know for all of these stocks so i just want to put it into perspective as far as like what we have modeled you know into our financial model and really thinking about like what we're expecting for revenue so in this case you know in 2024 the company did six and a half billion dollars of revenue in 2025 that increased by 40 percent up to 9.1 billion here in 2026 we're looking for another 33 increase that takes sales up over 12 billion and for 2027 we're still modeling in another 36 increase up to 16 billion in revenue by the time you get out to 2030 we're projecting the company to do 35 billion dollars worth of revenue that's a five-year compound annual growth rate of 31 percent meaning that's five times larger in our model than the amount of revenue that they did in 2024 now on top of that let's take a look at earnings or margins so the the operating margin in 2024 was 6.9 we're looking at 32 percent this year we have expanding to almost 47 percent by 2030. so we're looking for earnings this year of 14.66 so not quite double the eight dollars that they did last year by 2030 we have earnings per share going all the way up to 69 and a half dollars yet even after all of that growth is in our model it's still a two-star rated stock trading at a 35 percent premium so if you're paying you know the prices in the marketplace today you have to be assuming that our forecasts are way too low and that the company is going to be growing even faster than that five times you know greater revenue by 2030 than what we've seen all right well let's move over to some [00:15:46] Susan Jabinski: new research from morningstar about some of the companies that reported earnings last week and we'll start with tesla now tesla stock was down 14 percent after reporting mixed results and increased capex spending morningstar held its 450 fair value estimate on the stock so what's morningstar's take on tesla after earnings and is the stock attractive on pullback i would say it's really no surprise to us as you [00:16:12] Dave Sakara: mentioned you know the fair value is unchanged so that just tells me the analyst you know doesn't see anything different now than what he saw you know pre-earnings you know we talked about this last week you know we were looking for higher deliveries which would drive you know revenue growth higher and then we're also looking for capex to be higher as well we talked about why capex was going on i think maybe the only difference was just the amount of capex that they're spending and building new facilities so they're expanding their vehicle and their battery production i think even more than maybe what we had in the model but again it wasn't enough to change kind of the long-term thesis for this company so as far as where the stock is trading today it is you know looking very attractive it's a four-star rated stock at a 30 discount and i think this is also a really good example of looking at how long-term intrinsic valuation often plays out over time compared to the market price so i think this is a good one take a look at the price to fair value chart really over the past you know five or six years you can see in 2021 and 2022 you know this stock skyrocketed for the most part was in force i'm sorry in two star if not touching into one star territory 2022 the stock sold off came back down to our fair value overshot to the downside went into four star if maybe even touching five star territory a couple of times and we've just seen a lot of volatility then you know where the stock goes up a little bit too far comes back down too far goes back up too far so i think we're back in the cycle now where you know the stock was trading too high at the end of 2025 it's been selling off it's come down to the downside so if this is one that you want to play now looks like a good time to either be dollar cost averaging into you know the sell-off or if you wanted to own tesla in the past and you haven't [00:17:57] Susan Jabinski: now's a good time maybe to start getting involved now we also saw alphabet stock pull back after earnings about seven percent morningstar maintained its 433 dollar fair value estimate on the stock so [00:18:10] Dave Sakara: what stood out to you in alphabet's earnings report really strong earnings report when you think about a company this size and just how much they're still able to grow so as far as you know the top line goes you know they beat our estimates there i think the top line grew 24 if you look at google cloud that's where they host you know ai platforms that was up 82 operating margin overall expanded by 200 basis points and that of course was really driven by that cloud segment the operating margin there expanded by 15 points overall in our view we think the company's making substantial progress on their ai monetization specifically our team you know points to the backlog for google cloud the backlog there now is over 500 billion dollars it was about 100 billion dollars a year ago you know google search as much as google already controls the search market yeah that was still up 17 percent so a lot of good monetization using ai within you know their own business so when i think about the investment thesis here and having talked to our analyst now this is probably one of the only few ai plays out there that we see them being involved in the entire ai stack so when you think about it they have their own ai models that they're able to use both internally as well sell externally you know they're building ai semiconductors you know for their own use that they're now also starting to sell externally you have all the infrastructure that they've built for google cloud and then you've also got the applications to be able to monetize ai as well so in my mind when i look at their business model i think they have very good diversification across the [00:19:49] Susan Jabinski: entire economic value chain for artificial intelligence so that all sounds great dav so then why why did we see the stock sell off so much after earnings was it the capex spending i think so and i think it's like [00:20:04] Dave Sakara: we talked about the beginning of you know the show the market's really right now in the midst of kind of this change in focus it used to be these companies just couldn't spend enough capex on ai everyone wanted to get that first mover advantage you know in ai and we're now at the point where the focus is well okay well you've got all this capex spending going on but how are you going to actually make money in order to be able to make a return on all that capex spending so in this case while google is showing you know very good early stages of monetization they still raise their capex further they're looking at over 200 billion dollars of capex spending in 2026. i don't know susan i kind of used to remember when 200 billion dollars used to sound like a lot of money but with that amount of capex spending they're going to be free cash flow this year free cash flow negative this year and next year so to some degree i think all of these hyperscalers are now turning into what the market's looking at as really a show me [00:21:04] Susan Jabinski: story on that monetization all right so alphabet was a pick of yours before earnings pull back we held our fair value is it safe to say it's still a pick well you know if i liked it at 350 i love it [00:21:18] Dave Sakara: at 320 right um all kidding aside i mean there's no change to our fair value our fair value is still 433 per share so with where it's trading today it's a 26 discount so in our mind that's a pretty large margin of safety for the uncertainty that we think about the long-term business prospects for the company so [00:21:37] Susan Jabinski: enough to put it well into four-star territory all right well let's talk intel intel reported earnings stock fell nearly eight to eight percent excuse me morningstar raised its fair value estimate on the stock though by 15 to 103 per share so unpack those results dave i mean when you look at the results they [00:21:57] Dave Sakara: posted a very strong quarter but it's all based on the ai build out boom huge just tremendous demand increase for cpus which are used you know to manage ai workloads so with all of these data centers being built out i think people underestimated the need for those cpus which are kind of the workhorse for managing those ai workloads revenue up 25 year over year gross margin came in at 42 percent that's two points higher and they then boosted their guidance for the third quarter revenue to 19 which was above consensus so to put this all in perspective when we look at you know the server cpu market looks like it's now expected to grow here in the short term at a 50 compound annual growth rate such that it'll end up being you know four times higher than what a lot of previous forecasts were even as recently as last november so the fair value increase was a combination of a couple of things i mean really just incorporating these higher short-term results making a couple increases to our longer-term assumptions our team also noted the company made some progress on their manufacturing you know seeing better yields in their latest you know 18a process and then their 14a process is supposedly on pace for high volume production later in 2028 so as you noted you know that all impacted our fair value i just would say this is one where i think you just have to be very cautious there are a number of different cpu competitors out there and to some degree we're just in that part of a cycle where a rising tide is lifting all boats but this is one where i'm very cautious with all of these technology companies that their hardware that they're selling is in my mind very commodity oriented they're not the leaders in technology for ai so if we get you know any kind of hiccup in the story any kind of guidance pullbacks you know these are the ones that i would not be surprised to see them gap to the downside [00:23:59] Susan Jabinski: yeah and i'm just checking the star rating this morning is three stars so it's it's according to morningstar it looks fairly valued when you adjust for uncertainty okay let's talk service now results came in better than expected and morningstar maintained its 165 dollar fair value estimate on the shares now the market seemed to kind of just shrug off the results so walk through them dave and tell us when the negative sentiment around software names like service now might begin to clear i wish i knew so yeah i wish [00:24:30] Dave Sakara: i knew i mean it was just kind of this same story different quarter as you noted better than expected results slight increase to their guidance but the market is still just pricing in with all of these software stocks that ai is either going to disrupt or even completely displace you know their business you know over time in our view there's just no change to our investment thesis we think service now is a key software beneficiary of ai our analysts noted that deals with five or more ai products grew five and a half times year over year they now have over a billion dollars worth in annual contract value sequential growth accelerated you know to 40 percent for those ai products so fair values unchanged and this is one i'd recommend go read dan's note you know dan roman office the equity analyst that covers the stock you know his quote here that i picked out one of the best blends of growth and margins and enterprise software and results continue to show ai is not hurting the firm's fundamentals overall four star rated stock now trading at a 40 discount to fair value wow [00:25:37] Susan Jabinski: all right well it is time for our question of the week now if you have a question for dave you can reach us at our email address which is the morning filter at morningstar.com all right dave on the july thirteenth episode of the morning filter you called broadcom a garp stock and garp of course stands for growth at a reasonable price so walk through what it means and how to find garp stocks so a lot of [00:26:02] Dave Sakara: investors overall are just unwilling to pay high multiples for growth stocks and it just comes down to you have to have like a lot of belief in these companies growth to be able to pay those high multiples you know in the short term so i think one way for value oriented investors to find growth stocks that they're willing to invest in is to look for those stocks that have an attractive peg ratio so peg ratio is your price price to earnings to growth so your pe ratio divided by your longer term earnings growth rate and in that case i think it's okay to pay for high pe ratios here in the short term so long as you have that expectation for those faster growth dynamics in our case i look at like our five-year compound annual growth rate and i compare that to the pe ratio today all right well that's a great [00:26:56] Susan Jabinski: segue into your picks this week which all happen to be garp stocks how convenient uh the first one on [00:27:02] Dave Sakara: your list is nvidia so give us the highlights so nvidia is a four-star rated stock lasted traded at a 26 discount fair value not a big dividend payer only a half a percent dividend now cautionary it is a very high uncertainty so there's certainly a wide range of outcomes over the next five years but it's a company we rate with a wide economic moat that wide moat being based on switching costs and intangible [00:27:26] Susan Jabinski: assets so then dave what makes nvidia an attractive garp stock pick today it's interesting if you look [00:27:33] Dave Sakara: at the chart on this one over the past few months the stock's kind of been in a trading range between 190 and 230 per share i think it's at 208 you know as of close last friday our fair value is 280 dollars a share so to some degree i think the market you know it just turned its attention towards those commodity oriented tech hardware stocks while we have the shortages going on those stocks have moved up because earnings have just been skyrocketing but when i look at nvidia as a longer term investor and thinking about artificial intelligence you know the forward pe on the stock is currently at 22 times our five-year compound annual growth rate for earnings is 35 so that gives you that peg ratio of only 0.6 [00:28:16] Susan Jabinski: all right well your next pick is one i mentioned in the question and it's broadcom run us through the [00:28:21] Dave Sakara: numbers yeah it's a big discount to our long-term intrinsic value 40 discount puts it well into five-star territory again not a big dividend payer if you're looking for dividend stocks it's well under one percent another company of course tech companies in general we're going to rate at least with a high uncertainty if not some of them with a very high and in this case another company we think has a wide economic moat that wide economic moat being based on switching costs and intangible assets [00:28:49] Susan Jabinski: so then walk us through in detail how broadcom qualifies as a garb stock [00:28:53] Dave Sakara: yeah so broadcom makes what's called xpus those are custom ai accelerators and they're used in order to optimize ai workloads overall we think the market's underestimating the growth dynamics for these xpus company thinks the company is you know guiding conservatively so it looks like a pretty good setup fundamentally does have a pretty high forward pe ratio based on our earnings expectations for 2026 yeah we're looking at a 33 times multiple but our five-year compound annual growth rate our assumption there it puts it at 46 percent so if you take that 33 time or 33 times divide that by 0.46 you [00:29:32] Susan Jabinski: end up getting a peg ratio of 0.7 all right your next pick this week is not a tech stock it's lpl [00:29:40] Dave Sakara: financials so give us the bird's eye view on it so lpl also trading at a four percent or 40 discount five-star rated stock again not a big dividend payer you know growth stocks typically don't only four tenths of a percent we rate the company with a high uncertainty but we also rate it with a wide economic moat that moat being based on cost advantages and switching costs now lpl has been a pick of yours before [00:30:04] Susan Jabinski: and we actually had a question come into our inbox not long ago about it so spend a little time on lpl why you like it and how it fits that garp stock definition yeah well first i do have to caution it [00:30:15] Dave Sakara: looks like earnings are coming up this thursday after market close so you know whether or not you want to buy the stock getting ahead of that your call probably don't necessarily have to get ahead of earnings with as much of a discount to fair value you know even if the stock takes a pop it's still going to be you know well undervalued at the same point in time if you want to take you know a small position beforehand and if for whatever reason you get any kind of sell-off then you can dollar cost average in you know to the downside you know the company is the largest u.s independent broker and dealer so we think there's a couple of different ways that they benefit over time we're looking for an increase in assets under management just one as the markets you know go up over time that increases you know their AUM we're also looking for the AUM to growth just because more and more people are using investment advisors and we're seeing more new advisor come on to their platform now in this case the forward p/e ratio is pretty modest and if you look at the five-year compound annual growth rate we're looking for that to be over 20 percent so if you look at a forward p/e of 13 times you know divide that by 20 that gives you your peg ratio of 0.7. all right t-mobile is your next garp stock pick so what are some of the key metrics here so t-mobile stock is trading at a 23 discount puts it in four star territory pretty respectable dividend yield at 2.3 percent medium uncertainty narrow economic moat [00:31:39] Susan Jabinski: that narrow moat being based on efficient scale now we've talked a little bit on the podcast before about a lot of these wireless names selling off after space x's ipo so go into why those concerns might be a little bit overblown for t-mobile and then talk about how it fits your definition of a garp stock [00:31:58] Dave Sakara: sure as you noted you know all the stocks at&t verizon t-mobile had all been kind of on that downward trend after that spacex s1 i think part of the the base case you know for the market to price spacex where it is you know people expect that spacex is going to get directly involved in the traditional wireless market we don't think that's going to happen we think that the technology for you know the satellite coverage is really being best used for an overlay on top of traditional wireless really mostly used for more rural kind of areas in fact t-mobile i believe does have an agreement with spacex where they're using that satellite coverage in those rural areas but really it's only being used for for text messages which you really use data for voice chat so again if you have you know one of those voice chat apps you can use it there but they don't have a cell phone service using the satellite just yet i think that's something that they still need to improve the technology for so that's something you're not going to see roll out you know until sometime in the future now t-mobile did have earnings last week and the stocks kind of dropped pretty hard afterwards now it did take a nice bounce on friday but it's still down from where it was you know pre-earnings we think the market's overreacting we think this is much more of a change in traders sentiment around the stock than it is a change in the underlying fundamentals to some degree our analyst has noted that the company had kind of conditioned traders in the past to expect kind of this steadily increasing growth forecast you know quarter after quarter and that didn't happen you know this time around you know they noted there was a drop in new accounts but fundamentally it was offset by lower churns we're not necessarily all that concerned about it we trimmed our fair value slightly we lowered it by two percent to 235 from 240 that's really not an indication of any change in the longer term outlook here it's really just kind of dialing into maybe slightly lower you know near-term results than what we had modeled before forward pe on the stock is 17 times based on our earnings estimate for this year whereas our five-year compound annual growth rate our expectation there is for 24 and in fact that's a much faster growth rate than what we're expecting for either verizon or t at&t we expect this company has a better ability to increase prices we're looking for them to take some market share over time looking for them to complete a couple of tech token acquisitions and that's how we get to our 24 growth rate there so this is one where that peg [00:34:32] Susan Jabinski: ratio comes in at 0.7 all right and then your final pick this week is cnh industrial run through the [00:34:38] Dave Sakara: numbers on it so cnh trades at a big margin of safety from our fair value 46 discount more than enough to put it well into five-star territory again not much of a dividend yield a little bit under one percent it's a company we rate with a medium uncertainty which you kind of wouldn't expect for that much of a margin of safety here but we also rate it with a narrow economic moat that moat being based on [00:35:02] Susan Jabinski: switching costs and intangible assets now when you and i were talking about your picks before today's episode you said that cnh isn't your typical garp stock so how so dave and then why are you including [00:35:14] Dave Sakara: it as a pick this week if it's not well i mean i include with the garp pick because it meets all of the you know the peg ratio kind of numbers that i was looking for but yeah it's not kind of that stereotypical garp play typically a garp is a growth stock like a technology stock where you're looking for you know big earnings growth you know based on growth in like the underlying fundamentals because that business is expanding in this case this is really much more of a value play that we think is going to be coming off of cyclical lows but that in our mind is what's driving you know the growth here so the company's revenue you know 80 of it is agricultural equipment the other 20 comes from construction so if you look at what has happened over call it the past five years you know if you remember back in like the first couple years of the pandemic 2021 2022 there are just huge increases in the price for corn wheat and soybeans so that led to a big pull forward effect in agricultural equipment sales so that pulled forward the sales that you otherwise would have expected in 2023 2024 and to some degree even in 2025. so the stock has slid for really the past three years because we think that it's at very depressed earnings levels so it's now trading at you know 33 percent of 2022 earnings and we're now looking for you know a forecast of earnings per share of 48 cents in 2026 so down a lot from where it was in the past now based on some normalization as we get past this pull forward effect we're looking for a dollar in eps in 2027 so the forward pe on the stock right now is about 22 times based on this year's which of course you know with the kind of growth we're looking for in the rebound and earnings you know we get to a five-year compound annual growth rate of earnings of 32 percent [00:37:05] Susan Jabinski: so that puts that peg ratio at 0.7 all right well thank you for your time this week dave viewers and listeners who'd like more information about any of the stocks dave talked about today can visit morningstar.com for more details we hope you'll join us again next monday for the morning filter podcast at 9 a.m eastern 8 a.m central in the meantime please like this episode and subscribe have a great week [00:37:42] Speaker ?: time to see you next time you