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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.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
ACE Ltd114.34 USD0.27
BG Group PLC900.20 GBX-8.77
Deutsche Boerse AG58.75 EUR0.32
IMI PLC1,181.00 GBX-1.58-
Petrofac Ltd825.00 GBX-2.19
Reckitt Benckiser Group PLC5,255.00 GBX1.25
REXAM PLC452.40 GBX-0.70
About Author Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.