According to the Good Companies Screen, a Premium screener nested under the All-in-one Screener, four European companies with high business predictability and high GF Scores include Hermes International SA (XPAR:RMS, Financial), Sectra AB (OSTO:SECT B, Financial), Interroll Holding Ltd. (XSWX:INRN, Financial) and Medistim ASA (OSL:MEDI).
European markets remain undervalued despite geopolitical turmoil
As investors monitor several geopolitical events taking place in Europe, including the war in Ukraine and Finland becoming a member of the North Atlantic Treaty Organization, GuruFocus applied Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio)’s market valuation concept to several regions around the globe, including the U.S. and Europe.
The “Oracle of Omaha” once opined that the ratio of total market cap to gross domestic product is probably the “best” single measure of where market valuations stand at any given point in time. For global markets, the ratio considers the total market cap and gross domestic product for each country listed.
Several European markets remain undervalued based on the Buffett Indicator concept, including the Belgian and Spanish stock markets.
As of Wednesday, the Buffett indicator for the Belgian stock market stands at 58.72%, showing that the stock market is modestly undervalued compared to the 20-year minimum ratio of 31.76% and the 20-year maximum ratio of 96.23%. The implied market return of the Belgian stock market is approximately 10% per year, assuming a reversion to the 20-year median ratio of 68.14%.
The Buffett indicator for the Spanish stock market stands at 53.82%, showing that the stock market is modestly undervalued compared to the 20-year minimum ratio of 39.89% and the 20-year maximum ratio of 126.48%. The implied market return of the Spanish stock market is approximately 9.4% per year, assuming a reversion to the 20-year median ratio of 73.38%.
As such, investors may find opportunities in European companies that have high business predictability and high GF Scores. GuruFocus’ exclusive stock ranking system has been shown to be closely correlated to stock performance based on backtesting from 2006 to 2021. It considers five key ranks: financial strength, profitability, GF Value, growth and momentum.
Hermes International
Shares of Hermes International (XPAR:RMS, Financial) traded around 1,861 euros ($2,038.02) on Wednesday, showing that the stock is fairly valued based on its price-to-GF-Value ratio of 1.10.
The French luxury goods company has a GF Score of 92 out of 100 based on a rank of 10 out of 10 for financial strength, profitability and growth despite GF Value ranking just 5 out of 10 and momentum ranking just 3 out of 10.
Hermes’ high profitability rank is driven by several positive investing signs, which include a 4.5-star business predictability rank, a high Piotroski F-score of 8 out of 9 and an operating margin that has increased by approximately 3% per year on average over the past five years and is outperforming approximately 99% of global competitors.
Sectra AB
Shares of Sectra AB (OSTO:SECT B, Financial) traded around 160.40 Swedish krona ($15.61) on Wednesday, showing that the stock is modestly undervalued based on its price-to-GF-Value ratio of 0.88.
The Swedish medical image technology company has a GF Score of 98 out of 100 based on a rank of 10 out of 10 for profitability and growth, a GF Value rank of 6 out of 10 and a rank of 8 out of 10 for momentum and GF Value.
GuruFocus ranks Sectra’s business predictability 4.5 stars out of five.
Interroll Holding
Shares of Interroll Holding (XSWX:INRN, Financial) traded around 3,240 Swiss francs ($3,576.39) on Wednesday, showing that the stock is fairly valued based on its price-to-GF-Value ratio of 1.05.
The Swiss logistics company has a GF Score of 97 out of 100 based on a momentum rank of 9 out of 10, a GF Value rank of 5 out of 10 and a rank of 10 out of 10 for profitability, growth and financial strength.
Interroll Holding’s high profitability and growth are driven by several positive investing signs, which include a business predictability rank of five stars out of five and an operating margin that has increased by approximately 8.90% per year on average over the past five years and is outperforming more than 83% of global competitors.
Medistim
Shares of Medistim traded around 284 Norwegian krone ($27.21) on Wednesday, showing that the stock is fairly valued based on its price-to-GF-Value ratio of 0.93.
The Norwegian medical device company has a GF Score of 94 out of 100 based on a rank of 10 out of 10 for profitability, growth and financial strength. Despite this, the company’s momentum ranks just 4 out of 10 while its GF Value ranks just 6 out of 10.
Medistim’s high profitability and growth ranks are driven by several positive investing signs, which include a five-star business predictability rank and an operating margin that has increased by approximately 5.9% per year on average over the past five years and is outperforming approximately 90% of global competitors.
