(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. LFCF data sourced from Yahoo! Finance.)
Greek Prime Minister George Papandreou called for a referendum on the country’s latest bailout, a deal which would have significantly reduced his country’s debt burden in return for cuts in government spending. The Wall Street Journal calls the decision a “high stake gamble that could undermine the international effort to preserve the euro.”
Last Thursday the world applauded the EU leaders’ comprehensive plan to take on the debt crisis. The plan focused on recapitalizing banks, offered a 50% haircut for private Greek debtholders and leveraged the European Financial Stability Fund to 1 trillion euros. Markets rallied – sure there were sceptics – but things were finally looking up for the EU sovereign debt crisis.
Papandreou’s decision has thrown all of that optimism to the wind. Markets are just as confused if not more so in the aftermath of the announcement than before a plan was ever devised. What are the risks? What is the likely outcome? The kicker, of course, is that the government expects to hold the referendum in January, putting international markets in 2 months of suspense.
According to the Wall Street Journal, “A ‘yes’ vote in the referendum could deflate the massive street protests and strikes that threaten to paralyze Greece as it tries to enact a brutal austerity program to earn rescue loans from the euro zone and the International Monetary Fund. A ‘no’ vote, however, could bring down the government and cut off international funding for Greece, leaving the country facing a financial meltdown.”
CNBC reports stocks in major euro zone banks are showing double-digit losses after the Greek Prime Minister George Papandreou called for a referendum. The Prime Minister expects the country’s political forces and citizens to use good judgment and support the bill once they are fully informed.
So, how long will it be before European leaders get their act together? And more importantly, which European stocks should be on your radar over the coming weeks?
To help you explore the topic, we collected data on levered free cash flows, and identified the European companies that are trading at the steepest discounts relative to enterprise value.
Most of these stocks have been dragged down by the crisis in Europe, and now trade at attractive valuations. Should any of these names be on your watch list?
Use this list as a starting point for your own analysis.
analyse These Ideas (Tools Will Open In A New Window)
1. ASM International NV (ASMI): Engages in researching, developing, manufacturing, marketing, and servicing equipment and materials used to produce semiconductor devices. Incorporated in the Netherlands. Levered free cash flow at $209.09M vs. enterprise value at $1.41B (implies a LFCF/EV ratio at 14.83%).
2. AstraZeneca PLC (AZN): Develops, and commercializes prescription medicines for cardiovascular, gastrointestinal, infection, neuroscience, oncology, and respiratory and inflammation diseases worldwide. Incorporated in the United Kingdom. Levered free cash flow at $7.14B vs. enterprise value at $66.59B (implies a LFCF/EV ratio at 10.72%).
3. LM Ericsson Telephone Co. (ERIC): Provides communications equipment, professional services, and multimedia solutions to mobile and fixed networks operators worldwide. Incorporated in Sweden. Levered free cash flow at $2.80B vs. enterprise value at $27.78B (implies a LFCF/EV ratio at 10.08%).
4. Excel Maritime Carriers, Ltd. (EXM): Provides sea borne dry bulk cargo transportation services worldwide. Incorporated in Greece. Levered free cash flow at $281.21M vs. enterprise value at $1.26B (implies a LFCF/EV ratio at 22.32%).
5. France Telecom (FTE): Provides fixed telephony and mobile telecommunications, data transmission, Internet and multimedia, and other value-added services to consumers, businesses, and telecommunications operators. Incorporated in France. Levered free cash flow at $9.46B vs. enterprise value at $92.35B (implies a LFCF/EV ratio at 10.24%).
6. Foster Wheeler AG (FWLT): Provides construction and engineering services to oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance industries worldwide. Incorporated in Switzerland. Levered free cash flow at $239.03M vs. enterprise value at $1.82B (implies a LFCF/EV ratio at 13.13%).
7. Nokia Corporation (NOK): Provides Internet and digital mapping and navigation services worldwide. Incorporated in Finland. Levered free cash flow at $3.67B vs. enterprise value at $18.98B (implies a LFCF/EV ratio at 19.34%).
8. OceanFreight, Inc. (OCNF): Provides shipping transportation services. Incorporated in Greece. Levered free cash flow at $26.43M vs. enterprise value at $246.23M (implies a LFCF/EV ratio at 10.73%).
9. Statoil ASA (STO): Engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products. Incorporated in Norway. Levered free cash flow at $18.43B vs. enterprise value at $89.37B (implies a LFCF/EV ratio at 20.62%).
10. Xyratex Ltd. (XRTX): Provides modular enterprise-class data storage solutions and storage process technology. Incorporated in the United Kingdom. Levered free cash flow at $63.68M vs. enterprise value at $259.12M (implies a LFCF/EV ratio at 24.58%).
Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
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