Over the past month, a total of 18 stocks dropped into undervalued territory, meaning their Morningstar Ratings changed to 4 or 5 stars over the course of the month. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 1 or 2 stars are considered overvalued.
The 10 newly undervalued European stocks with the largest market capitalisation are:
• Hennes & Mauritz (HM B)
• Carlsberg (CARL B)
• Airbus Group (AIR)
• Rio Tinto (RIO)
• BP (BP.)
• ING Group (INGA)
• BAE Systems (BA.)
• Capgemini (CAP)
• NatWest Group (NWG)
• Swiss Life Group (SLHN)
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 July 12
The Morningstar Europe Index rose 0.42% over the past month, leaving the overall European stock market slightly undervalued, hovering at a 2% discount to its fair value estimate on a cap-weighted basis.
Of the 249 Europe-listed stocks covered by Morningstar analysts:
• 51% are undervalued, 36% are fairly valued, and 14% are overvalued.
• 18 are newly undervalued.
• Four are newly overvalued.
• Eight moved from a 4-star rating to a 5-star rating.
• Five moved from a 5-star rating to a 4-star rating.
• Four 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 the stock’s fair value estimate. A higher uncertainty rating equates to a larger range of stock prices that are considered fairly valued.
These two metrics, combined with the current stock price, are used to determine a stock's Morningstar Rating.
Metrics for this Month's Newly Undervalued Stocks
Hennes & Mauritz (HM B)
• Morningstar Rating: 4 stars
• 1-Month Return: -6.39%
Apparel manufacturing company Hennes & Mauritz has gained 8.10% over the past three months and lost 0.70% over the past year. The large-core stock has no economic moat. Hennes & Mauritz is trading at a 8% discount to its fair value estimate of SEK 190.00, with a medium uncertainty rating.
Carlsberg (CARL B)
• Morningstar Rating: 4 stars
• 1-Month Return: -9.45%
Alcoholic beverages company Carlsberg is down 5.00% over the past three months and 12.89% over the past year. The stock's price is 11% below its fair value estimate of DKK 970.00, with a medium uncertainty rating. The large-core stock has no economic moat.
Airbus Group (AIR)
• Morningstar Rating: 4 stars
• 1-Month Return: -10.71%
Aerospace and defense company Airbus has dropped 16.69% over the past three months and climbed 1.68% over the past year. The stock is trading at a 18% discount to its fair value estimate of €163.00, with a medium uncertainty rating. Airbus is a large-growth company with a wide economic moat.
Rio Tinto (RIO)
• Morningstar Rating: 4 stars
• 1-Month Return: 0.21%
Metals and mining firm Rio Tinto has lost 2.14% over the past three months and gained 9.59% over the past year. The large-value stock has no economic moat. Rio Tinto's fair value estimate rose to £59.00 from £58.00 during the month. It ended the month trading at a 11% discount to its new fair value estimate, with a medium uncertainty rating.
BP (BP.)
• Morningstar Rating: 4 stars
• 1-Month Return: -2.45%
Oil and gas firm BP has dropped 14.90% over the past three months and climbed 1.86% over the past year. The stock is trading at a 19% discount to its fair value estimate of 560p, with a high uncertainty rating. BP is a large-value company with no economic moat.
ING Group (INGA)
• Morningstar Rating: 4 stars
• 1-Month Return: 4.37%
The bank ING has gained 18.00% over the past three months and 40.89% over the past year. The large-value stock has a narrow economic moat. ING's fair value estimate rose to €20.00 from €17.00 during the month. It ended the month trading at a 16% discount to its new fair value estimate, with a high uncertainty rating.
BAE Systems (BA.)
• Morningstar Rating: 4 stars
• 1-Month Return: -8.68%
Aerospace and defense company BAE Systems is down 2.45% over the past three months and up 42.56% over the past year. The stock's price is 15% below its fair value estimate of £14.90, with a medium uncertainty rating. The large-growth stock has a wide economic moat.
Capgemini (CAP)
• Morningstar Rating: 4 stars
• 1-Month Return: 0.55%
Information technology services company Capgemini has dropped 5.68% over the past three months and climbed 11.74% over the past year. The stock is trading at an 8% discount to its fair value estimate of €210.00, with a medium uncertainty rating. Capgemini is a large-core company with a narrow economic moat.
NatWest (NWG)
• Morningstar Rating: 4 stars
• 1-Month Return: 4.35%
Regional bank NatWest Group has gained 17.89% over the past three months and 42.46% over the past year. The large-value stock has no economic moat. NatWest Group's fair value estimate rose to 360p from 280p during the month. It ended the month trading at a 10% discount to its new fair value estimate, with a medium uncertainty rating.
Swiss Life Group (SLHN)
• Morningstar Rating: 4 stars
• 1-Month Return: 6.25%
Insurance firm Swiss Life Group is up 14.59% over the past three months and 35.12% over the past year. Swiss Life Group's fair value estimate rose to CHF 770.00 from CHF 690.00 during the month. It ended the month trading at a 12% discount to its new fair value estimate, with a medium uncertainty rating. The large-core stock has no economic moat.
This article was generated with the help of automation and reviewed by Morningstar editors.