Each month, we screen the Europe-listed stocks under Morningstar’s coverage for newly undervalued names.
Over the past month, eight stocks saw their Morningstar Ratings change to 4 stars, while another seven dropped into 5-star territory. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 1 or 2 stars are considered overvalued.
The five new 5-star European stocks with the largest market capitalization are:
• Vestas Wind Systems VWS
• Heineken HEIA
• SSE SSE
• AkzoNobel AKZA
• JDE Peet’s JDEP
The five new 4-star European stocks with the largest market capitalization are:
• A.P. Moller-Maersk MAERSK B
• Saab SAAB B
• Leonardo LDO
• Redeia Corporacion RED
• Kingfisher KGF
The full lists of new 4- and 5-star stocks can be found at the bottom of this story. All returns in this article are reported in the stock’s base currency and all data is sourced from Morningstar Direct.
Newly Undervalued Stocks as of Jan. 13
The Morningstar Europe Index fell 1.56% over the past month, leaving the overall European stock market moderately undervalued, hovering at a 5% discount to its fair value estimate on a cap-weighted basis.
Of the 255 Europe-listed stocks covered by Morningstar analysts:
• 49% are undervalued, 38% are fairly valued, and 13% are overvalued.• Eight are newly undervalued.• Five are newly overvalued.• Seven moved from a 4-star rating to a 5-star rating.• None moved from a 5-star rating to a 4-star rating.• Among the newly undervalued stocks, none jumped from a 3-star rating to a 5-star rating.• Five are no longer undervalued.
Morningstar analysts assign every stock under their coverage a fair value estimate, which is an intrinsic measure of the stock’s worth, and an Uncertainty Rating, which captures the range of potential outcomes for that estimate. A higher Uncertainty Rating equates to a larger range of prices considered fairly valued.
These two metrics and the stock’s current price, are used to determine its Morningstar Rating.
Distribution of Star Ratings for Europe-Listed Stocks
Source: Morningstar Direct.
Metrics for this Month’s New 5-Star Stocks
Vestas Wind Systems VWS
• Morningstar Rating: 5 stars• One-Month Return: -0.08%
Specialty industrial machinery firm Vestas Wind Systems has lost 29.70% over the past three months and 52.22% over the past year. The mid-growth stock has no economic moat. Vestas Wind Systems is trading at a 42% discount to its fair value estimate of DKK 164, with an Uncertainty Rating of High.
Heineken HEIA
• Morningstar Rating: 5 stars• One-Month Return: -8.24%
Alcoholic beverages company Heineken is down 16.32% over the past three months and 29.22% over the past year. The stock’s price is 35% below its fair value estimate of EUR 100, with an Uncertainty Rating of Medium. The large-core stock has a narrow economic moat.
SSE SSE
• Morningstar Rating: 5 stars• One-Month Return: -6.14%
Utilities company SSE has dropped 14.42% over the past three months and 10.84% over the past year. The stock is trading at a 34% discount to its fair value estimate of GBX 2,350, with an Uncertainty Rating of Medium. SSE is a large-core company with no economic moat.
AkzoNobel AKZA
• Morningstar Rating: 5 stars• One-Month Return: -6.20%
Specialty chemicals company AkzoNobel is down 12.40% over the past three months and 19.02% over the past year. The stock’s price is 33% below its fair value estimate of EUR 83, with an Uncertainty Rating of Medium. The mid-core stock has a narrow economic moat.
JDE Peet’s JDEP
• Morningstar Rating: 5 stars• One-Month Return: -9.84%
Packaged foods company JDE Peet’s has lost 8.03% over the past three months and 25.64% over the past year. The mid-value stock has a narrow economic moat. JDE Peet’s is trading at a 37% discount to its fair value estimate of EUR 27, with an Uncertainty Rating of Medium.
Metrics for this Month’s New 4-Star Stocks
A.P. Moller-Maersk MAERSK B
• Morningstar Rating: 4 stars• One-Month Return: -11.83%
Marine shipping firm A.P. Moller-Maersk has climbed 5.15% over the past three months and dropped 10.50% over the past year. The stock is trading at a 22% discount to its fair value estimate of DKK 13,700, with an Uncertainty Rating of High. A.P. Moller-Maersk is a large-value company with no economic moat.
Saab SAAB B
• Morningstar Rating: 4 stars• One-Month Return: -0.97%
Aerospace and defense company Saab is up 8.41% over the past three months and 36.63% over the past year. The stock’s price is 13% below its fair value estimate of SEK 262.50, with an Uncertainty Rating of Medium. The mid-growth stock has a wide economic moat.
Leonardo LDO
• Morningstar Rating: 4 stars• One-Month Return: 6.41%
Aerospace and defense company Leonardo has climbed 34.31% over the past three months and 60.60% over the past year. The fair value estimate for Leonardo rose to EUR 33 from EUR 27 during the month. It ended the month trading at a 17% discount to its new fair value estimate, with an Uncertainty Rating of High. Leonardo is a large-core company with a narrow economic moat.
Redeia Corporacion RED
• Morningstar Rating: 4 stars• One-Month Return: -2.08%
Regulated electric company Redeia Corporacion has lost 3.14% over the past three months and gained 11.41% over the past year. The mid-core stock has no economic moat. Redeia Corporacion is trading at an 8% discount to its fair value estimate of EUR 17.50, with an Uncertainty Rating of Low.
Kingfisher KGF
• Morningstar Rating: 4 stars• One-Month Return: -11.93%
Home improvement retail company Kingfisher is down 26.91% over the past three months and up 9.19% over the past year. The stock’s price is 15% below its fair value estimate of GBX 267, with an Uncertainty Rating of Medium. The mid-value stock has no economic moat.
This article was generated with the help of automation and reviewed by Morningstar editors. Learn more about Morningstar’s use of automation.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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