Looking into European stocks for your portfolio? The market is seeming a bit more attractive than it did in 2011 when the headlines heavily drove market price. With this in mind, we created a list of high growth European stocks that may be considered undervalued by popular technical indicators.
To create the list below, we started by screening European stocks with market caps above $300 million for those with a PEG below 1 and P/E ratio below 15. Low P/Es are attractive because nobody wants to overpay for good growth -- although this number may indicate there is little growth at all.
To find stocks with high growth expectations, we then screened for names with 5-year EPS growth projected at 15% or higher. We were left with the eight names listed below.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
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As a recap, the stocks listed below have: EPS Growth next 5 years>15%, PEG <1, and P/E <15, a market cap above $300 million, and are based in Europe.
Even if you consider these names undervalued based on their technical indicators, we wanted to make sure potential investors have more data on hand. We note where these stocks have been flagged in our various bullish and bearish screens.
Do you think these names are currently undervalued? List Average 1-Year Return: 3%.
1. AEGON N.V. (AEG): Provides life insurance, pensions, and asset management products and services worldwide. Market cap at $10.71B. Country: Netherlands. P/E: 12.09. Peg: 0.66. EPS growth for the next 5 years: 18.45%.
2. Chicago Bridge & Iron Company N.V. (CBI): Provides engineering, procurement, and construction (EPC) solutions, as well as process technologies for the energy infrastructure projects. Market cap at $3.61B. Country: Netherlands. P/E: 13.36. Peg: 0.71. EPS growth for the next 5 years: 18.83%.
3. Ensco plc (ESV): Provides offshore contract drilling services to the oil and gas industry. Market cap at $13.49B. Country: United Kingdom. P/E: 13.27. Peg: 0.86. EPS growth for the next 5 years: 15.43%.
4. Logitech International SA (LOGI): Designs, manufactures, and markets hardware and software products that enable digital navigation, music and video entertainment, gaming, social networking, audio, and video communication over the Internet, video security, and home-entertainment control. Market cap at $1.44B. Country: Switzerland. P/E: 13.98. Peg: 0.78. EPS growth for the next 5 years: 17.87%.
- Enterprise value at $943.19M (implies a LFCF/EV ratio at 16.62%).
- Institutional buyers, such as hedge funds, have expressed interest in this stock in recent months: Net institutional purchases in the current quarter at 11.9M shares, which represents about 8.24% of the company's float of 144.40M shares.
- However, it has a concerning inventory trend relative to growth in receivables: Revenue grew by -7.05% during the most recent quarter ($547.69M vs. $589.2M y/y). Inventory grew by -1.15% during the same time period ($321.31M vs. $325.05M y/y). Inventory, as a percentage of current assets, increased from 29.98% to 35.24% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
5. Navios Maritime Holdings Inc. (NM): Operates as a seaborne shipping and logistics company in Greece. Market cap at $400.5M. Country: Greece. P/E: 5. Peg: 0.31. EPS growth for the next 5 years: 16%.
This stock has a couple bad signs, making it more of a contrarian play:
- To start, it is less profitable than its industry competitors: TTM gross margin at 40.22% vs. industry average at 54.58%. TTM operating margin at 17.32% vs. industry average at 28.32%. TTM pretax margin at 6.38% vs. industry average at 11.84%.
- It also has an accounting flag for its accounts receivable trends: Revenue grew by 4.07% during the most recent quarter ($172.08M vs. $165.35M y/y). Accounts receivable grew by 38.51% during the same time period ($172.54M vs. $124.57M y/y). Receivables, as a percentage of current assets, increased from 23.9% to 42.86% during the most recent quarter (comparing 3 months ending 2012-06-30 to 3 months ending 2011-06-30).
6. Siemens AG (SI): Operates in the industry, energy, and healthcare sectors worldwide. Market cap at $88.2B. Country: Germany. P/E: 11.97. Peg: 0.51. EPS growth for the next 5 years: 23.45%.
- Siemens has an accounting flag for its accounts receivable trends: Revenue grew by 9.52% during the most recent quarter ($19,542M vs. $17,844M y/y). Accounts receivable grew by 15.21% during the same time period ($16,769M vs. $14,555M y/y). Receivables, as a percentage of current assets, increased from 27.03% to 31.67% during the most recent quarter (comparing 3 months ending 2012-06-30 to 3 months ending 2011-06-30).
7. Telefonica, S.A. (TEF): Provides fixed and mobile telephony services primarily in Spain, rest of Europe, and Latin America. Market cap at $59.38B. Country: Spain. P/E: 3.53. Peg: 0.23. EPS growth for the next 5 years: 15.2%.
- Unlike Siemens, this stock has encouraging account receivable trends: Revenue grew by 0.12% during the most recent quarter ($15,469M vs. $15,451M y/y). Accounts receivable grew by -5.46% during the same time period ($12,748M vs. $13,484M y/y). Receivables, as a percentage of current assets, decreased from 67.05% to 58.04% during the most recent quarter (comparing 3 months ending 2012-06-30 to 3 months ending 2011-06-30).
8. Tenaris SA (TS): Engages in the manufacture and sale of steel pipe products. Market cap at $22.45B. Country: Luxembourg. P/E: 13.92. Peg: 0.76. EPS growth for the next 5 years: 18.41%.
*Profitability and institutional data sourced from Fidelity, price and accounting data sourced from Google Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.