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Finding Value in UK and European Markets

Rexam, Reckitt Benckiser and Petrofac are considered to be cheap right now by Morningstar analysts

Alanna Petroff 29 August, 2012 | 2:18PM

It can be difficult to find good quality companies that are attractively valued, but that’s just what Morningstar analysts have done.

Morningstar has released a list this month featuring the most attractively valued UK and European-domiciled companies that have sustainable competitive advantages (also known as economic moats). 

While some companies such as ArcelorMittal (MT) and BG Group (BG.) have been regularly featured on this list over the past few months, there are eight newcomers to this list. Below are the eight newly-featured quality companies that are considered to be good value investments:

(Click on the company ticker symbol to see stock information. Premium member can click on the company name to see Morningstar analyst research. Not a member? Get instant access when you take a free 14-day trial.)

Rexam (REX

Reckitt Benckiser (RB.)

Petrofac (PFC)

Deutsche Boerse (DB1)

ACE Ltd. (ACE)

Icon (ICLR)

Imi (IMI)

Electricité de France (EDF)

All companies on this list currently have four-star ratings, indicating that they are trading at reasonably significant discounts relative to Morningstar’s fair value estimates. For example, Morningstar analyst Lauren DeSanto estimates that the market should be valuing Reckitt Benckiser at 4,046p per share, which is more than 10% above the current market price.

Most of these companies were included on the list based on recent price weakness. “Rexam was the only company to enter our list primarily because of a valuation hike. Morningstar analyst Todd Wenning increased the firm’s fair value to 510p from 470p,” explains Morningstar equity analyst Lauren Migliore. That valuation hike means that Morningstar now believes Rexam is being undervalued by the market.

UK and European companies were considered for this list only if they had a market capitalisation of $1 billion or more and if they had an economic moat. Other factors such as low valuation uncertainty were also considered before companies were included on this list.

The above list was compiled using data from 15 August 2012.

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Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
ACE Ltd100.94 USD-0.42
BG Group PLC1,134.00 GBX0.53
Deutsche Boerse AG53.32 EUR1.02
IMI PLC1,493.00 GBX0.34-
Petrofac Ltd1,404.00 GBX0.65
Reckitt Benckiser Group PLC4,915.00 GBX0.00
REXAM PLC502.00 GBX1.25
About Author Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.