While trade talks between the U.S. and China are scheduled to begin later this month, investors and companies alike are still feeling the effects of the conflict. As such, investors may be interested in looking to other regions for value opportunities.
CNBC reported that European markets closed higher on Monday as investors were monitoring the developments in the trade war. The pan-European Stoxx 600 Index closed with a 0.3% gain, with construction and material stocks climbing more than 1% and basic resources leading losses with a 0.25% decline. In addition, employment data revealed the eurozone's unemployment rate fell to 7.4% in August, hitting its lowest level in more than 11 years.
As a result, value opportunities may be found among European consumer packaged goods companies that are trading below Peter Lynch value. These companies tend to perform well even in hard times since they produce goods that are always in demand. According to the GuruFocus Industry Overview page, European leaders in this space include Nestle SA (XSWX:NESN), Unilever NV (XAMS:UNA) and L'Oreal SA (XPAR:OR).
A legendary investor, Lynch developed this strategy in order to simplify his stock-picking process. With the belief that good, stable companies eventually trade at 15 times their annual earnings, he set the standard at a price-earnings ratio of 15. Stocks trading below this level are often considered good investments since their share prices are likely to appreciate over time, creating value for shareholders. The GuruFocus All-In-One Screener also looked for companies with a business predictability rank of at least two out of five stars and a 10-year revenue per share growth rate of at least 6%.
The screener found companies that met these criteria as of Oct. 1 included Sapmer (XPAR:ALMER), Austevoll Seafood ASA (OSL:AUSS), LDC SA (XPAR:LOUP) and SalMar ASA (OSL:SALM).
The French seafood company has a market cap of 61.23 million euros ($66.8 million); its shares closed at 17.5 euros on Monday with a price-earnings ratio of 5.01, a price-book ratio of 0.74 and a price-sales ratio of 0.34.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Sapmer's financial strength 5 out of 10. Although the company has sufficient interest coverage, the Altman Z-Score of 1.84 indicates it is under some financial pressure.
The company's profitability and growth scored an 8 out of 10 rating, driven by margins and returns that outperform over half of its competitors and a high Piotroski F-Score of 7, which implies operations are healthy. As a result of recording a slowdown in revenue per share growth over the last 12 months, the 2.5-star business predictability rank is on watch. According to GuruFocus, companies with this rank typically see their stocks gain an average of 7.3% per annum over a 10-year period.
The Norwegian seafood company, which operates in Norway, the U.K., Peru, Chile and the North Atlantic region, has a market cap of 17.41 billion krone ($1.9 billion); its shares closed at 86.25 krone on Monday with a price-earnings ratio of 11.64, a price-book ratio of 1.47 and a price-sales ratio of 0.78.
According to the Peter Lynch chart, the stock is undervalued.
Austevoll's financial strength was rated 5.4 out of 10 by GuruFocus. Although the company has issued approximately 5.86 million krone in new long-term debt over the last three years, it is at a manageable level as a result of adequate interest coverage. The Altman Z-Score of 2.07, however, indicates it is under some financial stress.
The company's profitability and growth scored an 8 out of 10 rating, boosted by operating margin expansion and strong returns that outperform industry peers. The company also has a moderate Piotroski F-Score of 5, which suggests operations are stable. The 3.5-star business predictability rank, however, is on watch as a result of a slowdown in revenue per share growth over the past 12 months. GuruFocus says companies with this rank typically see their stocks gain an average of 9.3% per year.
The French company, which processes poultry and a range of delicatessen products, has a market cap of 1.92 billion euros; its shares closed at 112.5 euros on Monday with a price-earnings ratio of 12.85, a price-book ratio of 1.46 and a price-sales ratio of 0.46.
Based on the Peter Lynch chart, the stock appears to be undervalued.
GuruFocus rated LDC's financial strength 7.4 out of 10. Although the company has issued approximately 248.01 million euros in new long-term debt over the past three years, it is at a manageable level due to comfortable interest coverage. In addition, the Altman Z-Score of 2.86 suggests the company is experiencing some financial headwinds.
The company's profitability and growth did not fare as well, scoring a 6 out of 10 rating. While the operating margin is expanding, it still underperforms over half of its competitors. LDC also has strong returns, consistent earnings and revenue growth, a moderate Piotroski F-Score of 5 and a 4.5-star business predictability rank. According to GuruFocus, companies with this rank typically see their stocks gain an average of 10.6% per year.
The Norwegian company, which operates a fish farm and is one of the world's largest producers of farmed salmon, has a market cap of 44.98 billion krone; its shares closed at 399 krone on Monday with a price-earnings ratio of 12.15, a price-book ratio of 5.59 and a price-sales ratio of 3.72.
The Peter Lynch chart suggests the stock is undervalued.
Supported by high interest coverage, SalMar's financial strength was rated 6.4 out of 10 by GuruFocus. In addition, the robust Altman Z-Score of 5.73 indicates the company is in good financial standing.
The company's profitability and growth fared even better, scoring a 9 out of 10 rating on the back of operating margin expansion, strong returns that outperform industry peers, steady earnings and revenue growth and a high Piotroski F-Score of 7. SalMar also has a two-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 6% per year.
Disclosure: No positions.
Read more here:
- Larry Robbins Boosts Brookdale Senior Living Stake
- BNY Mellon's Charles Scharf Named Wells Fargo's New CEO
- Rite Aid Shares Jump on Solid 2nd-Quarter Results
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
This article first appeared on GuruFocus.