Morningstar’s Michael Field has highlighted ‘three standout European stocks that present significant potential for investors seeking growth’.
The selection is made against Morningstar’s view that there is around 6% upside in European equity markets currently. All three of Morningstar’s standout stocks have fair value estimates that would suggest upside that far outstrips the wider market.
Michael Field, chief equity strategist at Morningstar, outlines the investment case for each of the three stocks in his own words:
Remy Cointreau
Morningstar views Remy Cointreau, French alcoholic beverage group, as 60% undervalued compared to the market price. Morningstar’s Fair Value Estimate for this stock is EUR 119.
“The tariffs placed directly on spirits as part of Trump’s trade war, alongside a weak economy impacting consumer spending, have collectively hurt luxury alcohol brands like Remy Cointreau. Although sales have been impacted by lower high-end consumer spending, this is only temporary, and we believe these shares could more than double in the longer term. For patient investors we believe this will recover in 2026, creating a real opportunity for investors looking to snag a cheap deal,” Michael Field noted.
Mercedes Benz
Morningstar sees value within Mercedes Benz, German automotive company, outlining the stock as 40% undervalued compared to the market price. Morningstar’s Fair Value Estimate for this stock is EUR 90.
“Despite Mercedes Benz being an already established and popular brand, we believe this stock is undervalued, in contrast to other market views. Although automakers have had a rough time recently with lower consumer spending and Trump’s targeted tariffs on the sector, we believe shares could almost double. Mercedes Benz is working on upgrading its S-class models and expanding its offerings of electric vehicles which should boost its sales in 2026,” Michael Field commented.
Rheinmetall
Morningstar see opportunity in Rheinmetall, German automotive and arms manufacturer, with 20% upside compared to the current market valuation. Morningstar’s Fair Value Estimate for Rheinmetall is EUR 2,220.
“Despite the sector rallying since the Russia/Ukraine war broke out, we believe the structural growth story has further to go. Over the next five years we see European defence budgets rising by 35%, which will massively benefit incumbent defence players like Rheinmetall. Countries, like Germany, who have supplied arms to Ukraine will need to replenish stock, which often takes a seven-year cycle, further adding legs to the longevity of this investment opportunity,” Michael Field said.