Each month, we screen the Europe-listed stocks under Morningstar’s coverage for newly undervalued names.
Over the past month, 20 stocks saw their Morningstar Ratings change to 4 stars, while another 12 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:
• Anheuser-Busch InBev ABI
• EDP Energias de Portugal EDP
• EDP Renováveis EDPR
• Infrastrutture Wireless Italiane INW
• Smith & Nephew SN.
The five new 4-star European stocks with the largest market capitalization are:
• Equinor EQNR
• Hennes & Mauritz HM B
• L’Oreal OR
• AstraZeneca AZN
• TotalEnergies TTE
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 Nov. 18
The Morningstar Europe Index fell 3.94% over the past month, leaving the overall European stock market moderately undervalued, hovering at a 7% discount to its fair value estimate on a cap-weighted basis.
Of the 255 Europe-listed stocks covered by Morningstar analysts:
• 51% are undervalued, 35% are fairly valued, and 14% are overvalued.
• 20 are newly undervalued.
• Three are newly overvalued.
• 12 moved from a 4-star rating to a 5-star rating.
• Five moved from a 5-star rating to a 4-star rating.
• Among the newly undervalued stocks, zero jumped from a 3-star rating to a 5-star rating.
• Nine 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
Data is for Europe-listed stocks currently under analyst coverage.
Source: Morningstar Direct.
Metrics for this Month’s New 5-Star Stocks
Anheuser-Busch InBev ABI
• Star Rating: ★★★★★
• One-Month Return: -12.09%
Alcoholic beverages company Anheuser-Busch InBev is down 3.02% over the past three months and 3.67% over the past year. The stock’s price is 36% below its fair value estimate of EUR 83, with an Uncertainty Rating of Medium. The large-core stock has a wide economic moat.
EDP Energias de Portugal EDP
• Star Rating: ★★★★★
• One-Month Return: -11.84%
Utilities company EDP Energias de Portugal has lost 7.38% over the past three months and 15.11% over the past year. The large-value stock has no economic moat. EDP Energias de Portugal is trading at a 31% discount to its fair value estimate of EUR 5, with an Uncertainty Rating of Medium.
EDP Renováveis EDPR
• Star Rating: ★★★★★
• One-Month Return: -20.93%
Renewable energy firm EDP Renováveis is down 21.21% over the past three months and 30.32% over the past year. The stock’s price is 35% below its fair value estimate of EUR 17, with an Uncertainty Rating of Medium. The mid-growth stock has no economic moat.
Infrastrutture Wireless Italiane INW
• Star Rating: ★★★★★
• One-Month Return: -13.05%
Real estate company Infrastrutture Wireless Italiane has lost 9.15% over the past three months and 6.65% over the past year. The mid-growth stock has a narrow economic moat. Infrastrutture Wireless Italiane is trading at a 24% discount to its fair value estimate of EUR 12.60, with an Uncertainty Rating of Low.
Smith & Nephew SN.
• Star Rating: ★★★★★
• One-Month Return: -13.03%
Medical devices company Smith & Nephew is down 15.26% over the past three months and 1.55% over the past year. The fair value estimate for Smith & Nephew was cut to £14.64 from £15.12 during the month. It ended the month trading at a 33% discount to its new fair value estimate, with an Uncertainty Rating of Medium. The mid-core stock has a narrow economic moat.
Metrics for this Month’s New 4-Star Stocks
Equinor EQNR
• Star Rating: ★★★★
• One-Month Return: 2.50%
Oil and gas firm Equinor has lost 7.18% over the past three months and 15.87% over the past year. The large-value stock has no economic moat. Equinor is trading at an 18% discount to its fair value estimate of NOK 320, with an Uncertainty Rating of High.
Hennes & Mauritz HM B
• Star Rating: ★★★★
• One-Month Return: -10.84%
Apparel manufacturing company Hennes & Mauritz has dropped 2.73% over the past three months and 4.87% over the past year. The stock is trading at a 19% discount to its fair value estimate of SEK 190, with an Uncertainty Rating of Medium. H&M is a large-core company with no economic moat.
L’Oreal OR
• Star Rating: ★★★★
• One-Month Return: -12.83%
Household and personal products company L’Oreal has lost 15.69% over the past three months and 22.20% over the past year. The large-core stock has a wide economic moat. L’Oreal is trading at a 21% discount to its fair value estimate of EUR 410, with an Uncertainty Rating of Medium.
AstraZeneca AZN
• Star Rating: ★★★★
• One-Month Return: -17.00%
Drug manufacturer AstraZeneca is down 24.00% over the past three months and 1.26% over the past year. The stock’s price is 20% below its fair value estimate of GBX 12,400, with an Uncertainty Rating of Medium. The large-growth stock has a wide economic moat.
TotalEnergies TTE
• Star Rating: ★★★★
• One-Month Return: -2.61%
Oil and gas firm TotalEnergies has lost 5.57% over the past three months and 1.27% over the past year. The large-value stock has no economic moat. TotalEnergies is trading at a 15% discount to its fair value estimate of EUR 68, with an Uncertainty Rating of High.
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.
