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Seeking Undervalued Southern European Stocks with Wilbur Ross

Holly LaFon

Holly LaFon

272 followers

Wilbur Ross (Trades, Portfolio) is a bankruptcy expert who launched his own company, $7 billion WL Ross & Co. LLC, in 2000, to identify and restructure distressed companies. After his recent success investing in the Bank of Ireland (IRE), Ross told Reuters that as his next venture he is eyeing assets in southern Europe, particularly Greece, Spain, Portugal and Italy, “because they’re still having some difficulties,” he said.

Certain March economic indicators suggest that a trend of growth is slowing in the euro zone. Retail sales fell for the second straight month in March, but the rate of decline was marginal and less than in February, according to the Markit Eurozone Retail Purchasing Managers’ Index.

“Country level PMIs converged towards the 50.0 mark that separates expansion from contraction, with growth easing to a marginal pace in Germany and Italy recording its slowest decrease in sales for more than three years. Sales in France were unchanged from February, ending a six-month run of decline," the report stated. 

The manufacturing and services sectors of the euro zone, however, continued their lengthy growth phases.

The All-In-One Screener identifies attractive assets trading in the same region Wilbur Ross (Trades, Portfolio) is combing for investment ideas. You can view the European countries discussed by becoming a member of GuruFocus Global. Because Ross is a seasoned distressed-company investor, this screen is set for slightly higher-quality companies trading at discounts to their intrinsic value.

Setting the screener to search countries in his targeted countries of Greece, Spain, Portugal and Italy, with financial strength of 5 or above, predictability of 2.5 or above, that are undervalued based on a discounted cash flow valuation, the screener yields four companies: Viscofan SA (FRA:VIS), Barón de Ley SA (XMCE:BDL), Reply (MIL:REY) and Aegean Marine Petroleum Network Inc. (ANW).

Barón de Ley (FRA:VIS)

Barón de Ley is a Spanish winery founded in 1985 on an estate that includes a 16th century Benedictine monastery. Its market cap is €350.2 million.

In five years, Barón de Ley’s stock increased 156% to €73 a share. According to the DCF calculator, the company’s fair value is $74.86, for a P/Value of 0.98. The company has a business predictability rank of 4.5, and five-year growth rates of 3.8% for revenue, 0.7% for EBITDA, 7.9% for free cash flow and 8.2% for book value.

Barón de Ley’s 10-year revenue and earnings growth history:

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Barón de Ley currently trades close to a 10-year high stock price, and a P/S ratio near a 10-year high at 4.27. It has a P/E ratio of 19 and P/B ratio of 1.73.

Reply (MIL:REY)

Reply is an Italy-based consulting, system integration and application management company focused on solutions for new communications channels and digital media. It has a €588.51 million market cap.

Reply’s stock price has advanced 312% in the past five years, closing at €64.55 a share on Friday. The DCF calculator assigns it a fair value of €84.60, for a P/value of 0.75. Reply has a business predictability rank of 2.5 stars, and five-year growth rates of 11.3% for revenue, 7.7% for EBITDA and 9.6% for book value.

The company’s 10-year revenue and earnings history:

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Reply is trading at a price near its 10-year high, with a P/S of 1.15 which is near a two-year high. It also has a P/E of 32.2.

Aegean Marine Petroleum Network Inc. (FRA:4AE)(ANW)

Greece’s Aegean Marine Petroleum Network Inc. provides marine fuel and lubricants to ships and ports as an international marine fuel logistics company. Its market cap is €441.05 million.

After losing 49% of its stock price value in five years, Aegean Marine Petroleum Network closed at $6.95 a share on Friday. According to the DCF calculation, its fair value is €13.29, a P/value of 0.71. Aegean has a business predictability rank of 2.5, with five-year growth rates of 31.7% for revenue, 1.1% for EBITDA and 13.2% for book value.

The company’s 10-year revenue and earnings history:

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Aegean currently trades with a P/E of 19.7, P/B of 0.9 and P/S of 0.06.

Viscofan SA (FRA:VIS)

Founded in 1975, Viscofan makes artificial casings for the meat industry. It has a €1.76 billion market cap.

Viscofan shares have traded up 39% since 2011 to close at €37.47 on Friday. By DCF calculation its fair value is €72.95, for a P/value of 0.52. The company has a business predictability ranking of 3, with five-year growth rates of 7.4% for revenue, 8.8% for EBITDA and 10.8% for book value.

Viscofan’s 10-year revenue and earnings history:

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The company has a P/E of 17.4, P/B near a two-year low at 3.38 and P/S of 2.29.

For more undervalued European stocks, try the All-In-One Screener here. Not a Premium Member of GuruFocus? Try it free for 7 days here!


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