Fund managers, analysts and equity strategists have been banging the drum about how much cheaper UK and European stocks are than US stocks for what seems like several years now.
This week, broker Liberum drilled down and came up with 110 shares that are trading at large discounts to their peers across the Atlantic.
Among the UK names trading at the largest discount to their US peers ("and thus should be examined by value-oriented investors"), are ConvaTec Group PLC (LSE:CTEC), an unglamorous specialist in ostomy bags, catheters and wound care (given a 'buy' rating an 276p share price target from Liberum); Drax Group (LSE:DRX), the sometimes coal-burning, biomass and carbon capture power group ('buy', TP 940p); Hays PLC (LSE:HAS), the recruiter where there is some "patience required" ('buy', TP 125p); Tritax Big Box REIT PLC (LSE:BBOX), the warehouse developer and operator ('Hold'); and Vistry Group PLC (LSE:VTY), the housebuilder with a large partnerships arm that works with local authorities and housing associations ('buy', TP 980p).
The European market stands at a 23.5% discount, while the UK lags even further at a 27.7% discount, strategists Joachim Klement and Susana Cruz noted.
"As a rule of thumb, once we go beyond the megacaps in Europe that trade at similar valuations as their peers in the US, the most expensive European stocks trade at similar forward PE-ratios than the cheapest stocks in the S&P 500," they said.
The report also highlighted sector-specific disparities, with European tech trading at a 20.8% discount to US tech - though this previously was a premium of 11.4% since the end of the global financial crisis.
"There is clearly a lot of value in European tech," said Klement and Cruz. "Similarly, there is a significantly larger than usual discount to the US in European financials, materials, and healthcare stocks."
But, investors shouldn't necessarily buy on the basis of a discount, as these can prove long-lasting in some sectors, with European real estate trading at the largest discount to the US but having done so throughout the last 15 years.
Furthermore, through a granular analysis of all 110 Industry Classification Benchmark (ICB) subsectors, the pair identified undervalued companies from each, including Nokia, STMicroelectronics (NYSE:STM) and Andritz among those European names with 'buy' recommendations.
Investors might view these findings as an incentive to reassess portfolio allocations.