12 Undervalued European High-Quality Stocks

Due to the slowdown in global equity markets, there is no shortage of opportunities for investors. Here are the best ideas from our analysts in Europe.

Valerio Baselli 28 July, 2022 | 12:00AM
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economic moat
An inflationary flare-up, a tidal shift in monetary policy, a war in Ukraine and a recession that seems more and more likely: the first half of 2022 has seen a collapse in global stock markets. The Old Continent, of course, has been no exception: the Morningstar Europe NR Index has lost 13% since the beginning of the year (data in euros, as of July 28).

According to Morningstar research, European equities are significantly undervalued today: the median stock in our European coverage universe trades at a 17% discount to its estimated fair value (as of July 28), making Europe the cheapest region in which to invest in equities.

Of course, paying an attractive price is important, but market discounts should not make us lose sight of another crucial aspect of picking stocks: quality. In the table below, we list the twelve most undervalued European equities among those with a Wide or Narrow economic moat rating, a stable or positive moat trend, a low or medium degree of uncertainty in the fair value estimate, and a 5-star Morningstar Stock Rating (5 stars means undervalued, 1 star means overvalued).  

These are therefore companies to which Morningstar analysts assign a stable competitive advantage and which are currently traded at particularly advantageous prices, compared to our estimate of their fair value.

 


Two of these twelve companies have a Wide economic moat according to Morningstar. 

Elekta AB 
Stock rating: ★★★★★
Economic moat: Wide
Fair value: 127 SEK
Uncertainty rating: Medium

Sweden-based Elekta develops, manufactures, and distributes treatment planning systems for neurosurgery and radiotherapy, including stereotactic radiosurgery and brachytherapy. Pandemic notwithstanding, demand for radiotherapy should stay healthy over the next decade. Elekta stands to benefit, but its success depends on its ability to commercialize Unity as well as withstand competition from Varian under Siemens Healthineers’ roof.

“We believe the entire industry has a mid-single-digit growth trajectory after the pandemic, but Elekta's more favorable geography mix, Unity prospects, and currently smaller share support our slightly higher forecast of 7%-8% growth per year”, says Morningstar regional director Alex Morozov.

Anheuser-Busch InBev SA/NV
Stock rating: ★★★★★
Economic moat: Wide
Fair value: 80 EUR
Uncertainty rating: Medium

Anheuser-Busch InBev is the largest brewer in the world and one of the world's top five consumer product companies, as measured by EBITDA (Earnings before interest, taxes, depreciation, and amortization). The company has a history of buying brands with promising growth platforms and then expanding distribution while ruthlessly squeezing costs from the businesses, which contributes to the company’s exemplary Morningstar Capital Allocation Rating. “AB InBev has one of the strongest cost advantages in our consumer defensive coverage and is among the most efficient operators,” says Morningstar director Philip Gorham. We think the market has underappreciated AB InBev stock for a long while now.

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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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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Admiral Group PLC2,234.00 GBX0.81Rating
Akzo Nobel NV68.88 EUR-0.75Rating
Alstom SA25.33 EUR0.00Rating
Anheuser-Busch InBev SA/NV53.02 EUR0.11Rating
Basf SE44.58 EUR0.00
Elekta AB Class B74.04 SEK0.00Rating
Grifols SA13.72 EUR0.00
Koninklijke Philips NV19.43 EUR0.00Rating
Nexi SpA8.79 EUR0.00Rating
Prosegur Cash SA0.70 EUR0.00
Proximus SA13.35 EUR0.15Rating
Worldline SA44.92 EUR3.10Rating

About Author

Valerio Baselli

Valerio Baselli  is Senior International Editor at Morningstar.