Is the UK Market Undervalued?

New research from Morningstar indicates where the country opportunities lie across European markets

Holly Cook 23 October, 2013 | 11:53AM
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The UK stock market is a shade undervalued at present, while Ireland, the Netherlands, Belgium and Switzerland are overvalued. But there remain more obvious pockets of opportunity elsewhere in Europe, with Norway standing out as an investment opportunity and Russia the most undervalued market for investors willing to take on risk. These are the findings of a recent study using Morningstar's new Equity Quantitative Research data. 

The colour-coded map below shows over-valued markets in red and under-valued markets in green. Just shy of the mid-point is the UK, signalling that LSE-listed UK shares are a shade undervalued at present.

Morningstar Equity Quantitative Research uses a statistical algorithm in combination with a hypothesis based on Morningstar's economic moat rating for stocks to formulate fair value estimates and uncertainty ratings for 32,000 companies worldwide. Collating the results by country allows us to take a view on the valuation of global markets and sectors.

Undervalued Markets

Russia
Norway
Germany
France
Portugal
Cyprus

Fairly Valued Markets

Austria
United Kingdom
Denmark

Overvalued Markets

Republic of Ireland
Netherlands
Belgium
Switzerland
Lithuania
Finland
Turkey
Greece
Sweden
Spain
Italy

(Click image to enlarge)

Morningstar's vice president of quantitative stock research, Warren Miller, will be discussing the methodology behind this research, the success of our equity ratings, and undervalued markets, sectors and UK stocks, at the London Investor Show on Friday October 25. Register to attend for free using promo code 'Morningstar'.

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.

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About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites