Over
the
past
18
months
or
so,
investors
have
had
to
deal
with
a
lot
of
uncertainty
and
volatility
in
the
financial
markets.
Many
observers
are
predicting
that
this
environment
will
persist
too
–
after
all,
higher
interest
rates
and
sticky
inflation
could
lead
to
an
economic
slowdown.
Against
this
backdrop,
investors
may
want
to
own
companies
that
can
provide
certainties
in
terms
of
cash
flow
and
business
fundamentals.
That’s
why
our
analysts
created
the
Best
Companies
to
Own
list,
identifying
117
names
that
fit
certain
Morningstar
criteria.
When
identifying
these
companies,
we
ensure
they
have
significant
competitive
advantages
(we
call
it
an
economic
moat)
that
are
either
stable
or
expanding.
The
best
businesses
also
have
predictable
cash
flows
and
are
managed
by
teams
that
have
a
history
of
making
smart
capital
allocation
decisions.
After
all,
when
you
buy
a
share,
you
own
a
piece
of
that
company.
It
is
important
to
understand
the
quality
of
the
company
you
own,
for
the
same
reason
you
would
test
drive
a
new
car
before
buying
it.
The
idea
behind
this
list
is
to
identify
the
solid,
high-quality
businesses
our
analysts
believe
in,
where
having
a
stake
puts
investors
in
a
far
better
position
than
the
option
of
chasing
market
movements
or
the
short-lived
boom
of
a
low-quality
company.
Beware,
though;
the
best
companies
are
not
always
the
best
stocks
to
buy.
The
price
you
pay
to
own
a
company,
solid
or
not,
is
also
very
important.
This
is
why
we
focus
on
the
best
companies
with
the
most
undervalued
share
prices
to
date.
And
more
precisely,
in
this
article
we
focus
on
the
10
best
European
companies
of
high
quality
(i.e.
with
a
‘stable’
or
‘positive’
economic
moat),
with
an
‘exemplary’
Morningstar
Capital
Allocation
Rating
(this
rating
–
also
called
Stewardship
Rating
–
is
a
judgement
on
how
the
company’s
management
is
able
to
increase
shareholders’
return
through
good
capital
allocation)
and
with
a
positive
Morningstar
Star
Rating
(which
means
that
they
are
undervalued
compared
to
the
fair
value
estimated
by
our
analysis).
Without
further
ado,
here
are
the
10
best
European
stocks.
Among
these
10
firms,
Just
Eat
(JET
for
the
London
Stock
Exchange
listing
and
TKWY
for
the
Dutch
option),
which
shows
an
undervaluation
of
as
much
as
79%
according
to
Morningstar’s
analysis
(albeit
with
a
fair
value
uncertainty
considered
‘very
high’)
and
Ayden
(ADYEN),
the
only
company
to
combine
a
‘wide’
Economic
Moat
with
a
positive
trend
and
an
‘exemplary’
capital
allocation,
are
certainly
worth
mentioning.
Just
Eat
Takeaway.com
NV
(JET/TKWY)
Star
Rating:
★★★★★
Economic
Moat:
Narrow
Fair
Value:
EUR
81
Fair
Value
Uncertainty:
Very
High
Just
Eat
Takeaway
reported
a
first-quarter
2023
trading
update
with
total
orders
down
14%
and
gross
transaction
value
down
8%
(down
8%
at
constant
currency),
lower
than
expectations.
Southern
Europe,
Australia,
and
New
Zealand
continue
to
be
the
main
detractors,
but
top-line
performance
was
disappointing
across
the
board.
Order
declines
were
broadly
expected
due
to
tough
comparable
and
a
lower
number
of
low-contribution
orders,
while
lower
GTV
declines
are
the
result
of
higher
average
order
values
(restaurants
passing
on
inflation
and
Just
Eat
reducing
the
number
of
low-value
orders)
as
well
as
positive
currency
effects.
On
guidance,
management
upgraded
its
outlook
for
fiscal
2023
adjusted
EBITDA
to
EUR
275
million
from
EUR
225
million
and
introduced
top-line
guidance
(GTV
growth
from
negative
4%
to
2%
with
growth
skewed
toward
the
end
of
the
year
given
soft
comps
from
last
year).
“Management
also
expects
free
cash
flow
(excluding
working
capital
movements)
to
turn
positive
in
mid-2024,
which
we
think
is
achievable
given
recent
profitability
improvements
and
cost
controls,”
says
Ioannis
Pontikis,
senior
equity
analyst
at
Morningstar.
“We
expect
to
adjust
our
midterm
growth
outlook
(lower)
and
EBITDA
estimates
(higher)
after
we
digest
results,
but
we
don’t
expect
to
materially
change
our
EUR
81
fair
value
estimate
as
our
long-term
value
drivers
remain
intact.
Shares
trade
deep
in
5-star
territory.”
Adyen
NV
(ADYEN)
Star
Rating:
★★★★
Economic
Moat:
Wide
Fair
Value:
EUR
1,870
Fair
Value
Uncertainty:
High
Adyen
is
capturing
the
e-commerce
market
by
storm
by
solving
the
complex
payment
needs
of
large
and
global
merchants.
It
combines
the
entire
merchant
acquiring
value
chain,
including
the
settlement
into
a
single
platform,
offering
local
acquiring
services
globally,
reducing
costs
for
merchants,
and
allowing
its
clients
to
scale
worldwide
in
an
instant.
Being
exposed
to
the
fast-growing
e-commerce
space
has
been
a
boon
for
Adyen
and
will
continue
to
be
the
core
growth
driver.
In
December
2022,
Morningstar’s
analysts
raised
their
fair
value
estimate
for
Adyen
to
EUR
1,870
per
share
from
the
previous
EUR
1,770.
“We
refreshed
our
model
slightly,
although
the
change
in
fair
value
came
predominantly
from
the
time
value
of
money
since
our
last
update.
Our
fair
value
estimate
implies
a
2022
enterprise
value/EBITDA
ratio
of
58,
which
reflects
the
very
strong
growth
rates
we
expect
from
Adyen,”
Niklas
Kammer,equity
analyst
at
Morningstar,
explains.
“Our
forecast
is
based
on
strong
volume
growth
in
the
e-commerce
segment,
increasing
volumes
from
in-store
transactions,
and
issuing
will
contribute
as
well.
We
expect
a
29%
acquiring
volume
CAGR
over
the
next
five
years
as
Adyen
boards
more
large
merchants
and
expands
with
existing
clients.
Over
our
full
10-year
explicit
forecast
our
assumption
declines
to
a
19%
CAGR,”
the
analyst
says.
Kammer
does
expect
significant
margin
gains
given
Adyen’s
scalable
business
model,
and
he
pencils
in
significant
staff
growth
over
the
next
10
years.
“We
believe
Adyen
will
need
to
invest
in
marketing,
sales,
and
engineers
if
it
wants
to
pursue
its
high-growth
outlook.
Our
EBITDA
margin
expands
from
64%
in
2021
to
76%
in
2031.”
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