12 Undervalued European Stocks to Buy
In this piece, we will take a look at ten undervalued European stocks to buy. If you want to skip our analysis of what's happening on the other side of the pond, then head on over to 5 Undervalued European Stocks to Buy.
Europe hasn't been doing well economically over the past year or so. The third biggest economy out of the five continents that are measured for their economic output, its gross domestic product currently sits at $24.8 trillion according to estimates by the International Monetary Fund (IMF). On a side note, before we get into a detailed analysis of what's going on in Europe, consider the fact that the United States of America, which is the largest economy in the world in nominal terms, currently has an economy of $26.8 trillion and you'll realize the reason behind America's dominance across the world today.
So, back to Europe. The continent has led the world in scientific advancements and progress up until the 19th century, with nearly all of the world's colonial powers having originated from Europe. The world's largest colonial power, whose economy accounted for nearly a quarter of the world GDP in 1870 was the British Empire. Additionally, crucial modern day inventions such as the jet engine, the rocket, and the automobile also trace their roots to Europe with some of these also simultaneously being developed in America.
Taking a deeper look into the continent, Germany is Europe's largest economy with a GDP of $4 trillion in 2022. The second and third largest economies are the United Kingdom and France, with the three combined housing some of the most important companies in the world. Germany is known for its strong automotive and energy sector, with giants such as Volkswagen AG (OTCMKTS:VWAGY), Uniper SE (OTCMKTS:UNPRF), and Mercedes-Benz Group AG (OTCMKTS:MBGYY) being the three largest German companies by revenue through having cumulatively posted $703 trillion in revenue as of 2022. These days, Mercedes, like several other large automotive companies, is focusing on environmentally friendly technologies and products. For instance, the firm announced in June 2023 that it is working with a Swedish startup to procure 50,000 tonnes of steel manufactured through emissions free technologies.
Volkswagen, on the other hand, is creating a bit of controversy while also simultaneously growing its electric vehicle sales. The firm's earnings per share (EPS) effectively stood flat annually by the end of 2022, and this has not escaped the attention of its CEO. In an online meeting earlier this month, CEO Thomas Sch?fer told top management that he was giving them what was effectively a final "wake up call" to reduce costs in the short term as the firm aims to gain a foothold in the electric vehicle market and address the needs of the conventional car market at the same time. On the positive side of things, at least the electric vehicle strategy seems to be working since the latest data shows that by June 2023, the company had delivered 321,600 electric vehicles to mark a strong 50% annual growth.
As a whole though, Europe has struggled recently due to the effects of the Russian invasion in Ukraine. Both Germany and the U.K. have seen inflation soar to multi year highs as they were forced to deal with alternative sources for Russian gas after sanctions were placed on Russia due to its actions. In fact, the German economy powerhouse's biggest weakness has been laid bare as well, as Europe's largest economy continues to contract and struggle with restarting its factories and returning to growth. While there are worries about a recession in the U.S., Germany has already entered one as data showed in June that its economy had contracted by 0.3% in the first quarter which had built upon a 0.5% contraction during the fourth quarter of 2022. These figures come as the International Monetary Fund's (IMF) estimates that the German economy will contract by 0.1% this year. Cumulatively, the poor economic performance of what seemed as a well tuned economic engine just a handful of years back has brought back memories of a time when Germany was called the black sheep of Europe. The slowdown also doesn't bode well for the Eurozone, as Germany has often led the bloc in growth and therefore raised the region's productivity along with its own.
Any talk of Europe would be incomplete without the U.K. Britain, while facing its own woes of inflation that just doesn't want to go away and an economy that hasn't found any fans for years, is still one of the most technologically advanced nations on the planet. One advanced British firm is Rolls-Royce Holdings plc (OTCMKTS:RYCEY), which plans to run nuclear reactors on the Moon. The firm, though, is expecting 2023 to turn out much better than 2022, despite Britain's woes. In a recent investor call, Rolls-Royce's management shared:
Before I wrap up, I would like to share our view of 2023 and our guidance for financial performance this year. In 2022, our performance improved, driven by good underlying progress, but there are also some benefits that will not repeat at the same level. These are detailed in the supplementary slides for you, along with some additional guidance detail we hope you find useful.
We expect to achieve a higher operating profit and cash flows this year, reflecting the actions we are taking and the market growth as widebody flying recovers and as we convert our order book into profits. For 2023, we expect to deliver operating profit of ￡800 million to ￡1 billion, which includes a benefit of ￡100 million to ￡200 million from targeted contract improvements versus around ￡300 million last year. We expect free cash flow of ￡600 million to ￡800 million, which factors in ￡500 million to ￡700 million of LTSA creditor growth versus the growth of around ￡800 million in 2022 as shop visits increase.
With these details in mind, let's take a look at some undervalued European stocks. Some top names are Stellantis N.V. (NYSE:STLA), Vodafone Group Public Limited Company (NASDAQ:VOD), and BioNTech SE (NASDAQ:BNTX).
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Our Methodology
To compile our list of the most undervalued European stocks to buy, we narrowed down those firms headquartered in Europe which have made their shares available for trading on major U.S. exchanges. They were then sifted based on Buy or higher analyst ratings and were ranked according to their P/E ratio. Then, out of the 40 firms with the lowest P/E ratios, those with the highest number of hedge fund investors as of Q1 2023 courtesy of Insider Monkey's database of 943 hedge funds were narrowed down as the most undervalued European stocks to buy. The firms are ranked through their P/E ratios.
10 Undervalued European Stocks To Buy Now
10. CNH Industrial N.V. (NYSE:CNHI)
Latest Trailing P/E Ratio: 9.35
CNH Industrial N.V. (NYSE:CNHI) is an agricultural equipment manufacturer with a global operations base. The firm has beaten analyst EPS estimates for all four of its previous quarters, and it is currently in the midst of a share buyback program.
By the end of this year's first quarter, 35 out of the 943 hedge funds part of Insider Monkey's database had bought and owned CNH Industrial N.V. (NYSE:CNHI)'s shares. Out of these, the firm's largest investor is Natixis Global Asset Management's Harris Associates through a stake of $1.4 billion.
Along with Vodafone Group Public Limited Company (NASDAQ:VOD), Stellantis N.V. (NYSE:STLA), and BioNTech SE (NASDAQ:BNTX), CNH Industrial N.V. (NYSE:CNHI) is a great undervalued European stock.
9. AerCap Holdings N.V. (NYSE:AER)
Latest Trailing P/E Ratio: 9
AerCap Holdings N.V. (NYSE:AER) is an Ireland based firm that leases and manages aircraft parts and equipment. It's slated to benefit quite heavily from the growth in air travel after the coronavirus pandemic, making it no wonder that the stock is rated Strong Buy on average.
Insider Monkey took a look at 943 hedge funds for their first quarter of 2023 shareholdings to find out that 44 had invested in the firm. AerCap Holdings N.V. (NYSE:AER)'s largest investor in our database is Boykin Curry's Eagle Capital Management since it owns 8.5 million shares that are worth $478 million.
8. Rio Tinto Group (NYSE:RIO)
Latest Trailing P/E Ratio: 8.83
Rio Tinto Group (NYSE:RIO) is one of the largest mining companies in the world. Growth in industrial output affects the demand for its products, and the shares are rated Strong But on average.
As of March 2023, 33 of the 943 hedge funds part of Insider Monkey's database had bought Rio Tinto Group (NYSE:RIO)'s shares. Ken Fisher's Fisher Asset Management is the largest investor courtesy of a $1 billion stake.
7. Capri Holdings Limited (NYSE:CPRI)
Latest Trailing P/E Ratio: 7.67
Capri Holdings Limited (NYSE:CPRI) is a luxury goods company that owns some of the best known brands in the world such as Versace and Michael Kors. The shares have a sizeable $16 upside and are rated Buy on average.
Capri Holdings Limited (NYSE:CPRI) has the highest number of hedge fund investors on our list, with 47 having held a stake in the firm during Q1 2023. The firm's largest shareholder out of these is Richard Mashaal's Rima Senvest Management with a $212 million investment.
6. Euronav NV (NYSE:EURN)
Latest Trailing P/E Ratio: 7.23
Euronav NV (NYSE:EURN) is a midstream oil company that primarily deals with crude oil. The firm's been facing a favorable market for its old vessels these days as demand has grown after Russia's Ukraine invasion.
Insider Monkey dug through 943 hedge fund portfolios for this year's first quarter to find out that 26 had invested in Euronav NV (NYSE:EURN). Out of these, the firm's largest investor is Ryan Tolkin (Cio)'s Schonfeld Strategic Advisors through an investment of $41 million.
Stellantis N.V. (NYSE:STLA), Euronav NV (NYSE:EURN), Vodafone Group Public Limited Company (NASDAQ:VOD), and BioNTech SE (NASDAQ:BNTX) are some top undervalued European stocks.
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Disclosure: None. 10 Undervalued European Stocks To Buy Now is originally published on Insider Monkey.