Handelsblatt searched the Dax, Stoxx 50 and Dow Jones for so-called quality stocks that are undervalued - i.e. whose price level is lower than the long-term average.
In order to be selected as a quality stock, the companies must have consistently fulfilled five conditions over the past five years:
- Rising or at least stable earnings before interest and taxes (EBIT),
- high liquid funds from the core business (operating cash flow) to cover ongoing costs at all times,
- low to moderate net debt in relation to equity; well below 100 percent,
- Rising dividends year after year,
- lower valuation than the company's own ten-year average - calculated from the ratio of consolidated earnings to market capitalization.
The sharp rise in share prices in recent years means that only five out of a total of 120 companies listed on the Dow, Stoxx and Dax fulfill all five conditions. Only one stock from the leading German index is included.
Visa $V (-1,27 %): The moat stock is available with a six percent valuation discount
Current dividend yield: 0.8%
Several million merchants worldwide accept payments in supermarkets, when shopping online or when traveling abroad. More than half of the group's revenues remain as profit, making Visa one of the most profitable companies worldwide and at the same time a typical moat share.
Higher prices and thus inflation have a positive effect, as they mean higher revenues for Visa because the credit card fees are linked to the merchant's turnover as a percentage.
L'Oréal $OR (+1,13 %): Ten percent valuation discount and the Group is growing faster than the market
Current dividend yield: 1.9%
When the world's largest cosmetics manufacturer reported sales growth of 4.2 percent in the past quarter, the share was one of the biggest losers of the day. Analysts had expected more. The share is trading 20 percent below its record high.
According to analysts' average forecasts, L'Oréal should earn 6.7 billion euros before interest and taxes in the current full year. That would be more than ever before and almost twice as much as five years ago. In the same period, the dividend per share rose from 3.85 euros to seven euros.
With a P/E ratio of 27.4 based on the earnings forecast for the next four quarters, the share is valued ten percent lower than its ten-year average.
Procter & Gamble $PG (-0,52 %): The dividend is safe and always rising
Current dividend yield: 2.9%
Branded products such as Ariel, Pampers, Braun and Gillette provide the American consumer goods manufacturer with reliably rising earnings. Over the past five years, earnings before interest and taxes have risen by 23%.
However, this year has shown that even such defensive shares are not resistant to price losses. Procter & Gamble is currently trading just under 20 percent below the record high it reached twelve months ago.
There are two reasons for this: the preference of many investors for more speculative technology shares, but also higher financial burdens for many consumers due to the rising cost of living. As a result, more consumers preferred cheaper own brands from retailers such as Walmart in the USA or Edeka and Rewe in Germany.
In the long history of the stock market, such price setbacks have almost always proved to be good opportunities to enter the market. The share is currently valued at a P/E ratio of 20.8 based on the earnings forecast for the next four quarters. This is seven percent below the average of the past ten years - after P&G had been valued above the historical average in recent years.
The strongest argument is probably the profit distributions. The Group has paid dividends every year since 1890. Since the end of the 1950s, Procter & Gamble has increased its dividend every year. Around 50 percent of profits go to shareholders.
This leaves enough of a buffer to increase the dividend even in years with slightly falling profits. Over the past five years, the dividend has risen by around one euro to 3.75 euros per share.
German Stock Exchange $DB1 (-3,17 %): Not only the stock market business drives profits
Current dividend yield: 1.8%
The Frankfurt stock exchange operator is set for its seventh record profit year in a row in 2025. In the third quarter, net revenue, pre-tax profits and earnings per share continued to rise as usual. Nevertheless, the share, which has risen sharply in recent years, has come under pressure in recent months: down 25% since the beginning of May.
Deutsche Börse is currently negotiating the purchase of the fund management platform Allfunds for 5.3 billion euros. Allfunds offers fund managers and distributors a platform for trading, data analysis and compliance systems.
The result of so much consistency is reliable dividends: The dividend has risen for nine years in a row, and the tenth increase is due next spring.
In view of the recent share price losses - coupled with rising consolidated profits - the share is no longer overvalued after a long time. With a P/E ratio of 18.7 based on the expected profits in the next four quarters, the share is valued three percent lower than its ten-year average.
Novo-Nordisk $NOVO B (-1,69 %): Highest valuation discount and highly speculative
Current dividend yield: 3.8%
The most speculative share among the stocks portrayed here is Novo Nordisk. With the presentation of its third-quarter results, the Danish pharmaceutical group once again lowered its sales and earnings targets. In addition, the management, under its new CEO since August, Maziar Mike Doustdar, cut its investment plans.
The company had grown strongly with the sales injection Wegovy, which had made Novo Nordisk the most valuable stock market group in Europe for a time, before competitors, above all the US group Eli Lilly $LLY (-1,4 %)successfully competed with similar products. Mass redundancies at Novo Nordisk were the result.
Despite all the setbacks, the pharmaceutical company is still increasing its profits - but at a slower rate. In the current year, analysts are forecasting average earnings before interest and taxes of the equivalent of 14.1 billion euros, compared to 13.5 billion euros in the previous year.
Since last summer's record high, the share price has fallen by 70 percent. This constellation - rising profits, collapsing share price - makes the once very highly valued share with a P/E ratio of 12.9 suddenly inexpensive. The ten-year average is almost twice as high with a P/E ratio of 23.4. No other quality share is currently trading at such a high valuation discount.
Novo Nordisk recently achieved positive results in tests with the drug Amycretin in diabetes patients. According to the company, these patients reduced their weight considerably and were also able to significantly lower their blood sugar levels.
This was Novo Nordisk's core business before the hype surrounding weight loss injections began. Over the past 30 years, the number of diabetics worldwide has quadrupled to around half a billion. According to the market research institute Mordor Intelligence, the Group has a 45 to 50 percent share of insulin products, making it the undisputed global market leader.
Source text (excerpt) & image, Handelsblatt 01.12.25
