EU Crisis: Summit Ends in Eurozone Treaty
Are you curious about what happened at the EU Summit and how it might affect the market? EU leaders concluded the meetings with a eurozone treaty that helps pave the way for financial integration of the 17-country currency bloc-at least they hope so.
Bloomberg sums up the gist of the meetings: "Leaders added 200 billion euros ($267 billion) to their warchest and tightened rules to curb future debts. They sped the start of a 500 billion-euro rescue fund to next year and diluted a demand that bondholders shoulder losses in rescues."
Leaders set a March deadline for agreeing to the language of the new rulebook. At that time, the leaders can also reassess plans to cap the overall lending of their permanent rescue facility at 500 billion euros.
German Chancellor Angela Merkel told reporters the summit's fiscal pact sets Europe on the path to a "lastingly stable euro."
Meanwhile, the U.K. was notably absent from the new treaty. This is likely over U.K. Prime Minister David Cameron's refusal to back a 27-nation pact "without ironclad guarantees of a British veto right over future financial regulations. Cameron called them a threat to London's standing as Europe's leading financial center."
Time will tell if the summit's agreements will give the debt crisis the one-two-punch knockout, but it's better than nothing.
Markets seemed to take the news well. After yesterday's dip, the markets have made a nice recovery, with the DJIA rising over 1.5%.
Not everyone is convinced the rally is well founded, however. As Henry Blodger of Business Insider puts it: "If the market continues to soar, it will only be because everyone has been completely fooled and distracted by the lovely smoke and mirrors show Europe just put on."
Do you think European companies have the most to gain from an economic rebound?
To help find stock that may benefit we created a universe of European stocks trading on the U.S. stocks exchange and searched among them for those considered undervalued.
To do that, we collected data on levered free cash flows, and identified the names that are trading at a significant discount to enterprise value.
When the ratio of levered free cash flow to enterprise value is high, it may indicate that the price is too low. At the very least, it indicates that the company is producing a lot of cash.
So you think these names are trading at a discount? Use the list below as a starting off point for your own analysis.
List sorted by LFCF/EV ratio. (Click here to access free, interactive tools to analyze these ideas.)
1. Prudential (NYS: PUK) : Provides retail financial products and services, and asset management services to individuals and businesses in Asia, the United States, and the United Kingdom. Market cap of $26.19B. Country: United Kingdom. Levered free cash flow/enterprise value at 40.52% (levered free cash flow at $13.27B and enterprise value at $32.75B).
2. Global Indemnity (NAS: GBLI) : Provides admitted and non admitted specialty property and casualty insurance products worldwide. Market cap of $577.75M. Country: Ireland. Levered free cash flow/enterprise value at 30.92% (levered free cash flow at $178.20M and enterprise value at $576.32M).
3. XL Group (NYS: XL) : Provides insurance and reinsurance coverages to industrial, commercial, and professional firms, insurance companies, and other enterprises worldwide. Market cap of $6.59B. Country: Ireland. Levered free cash flow/enterprise value at 28.18% (levered free cash flow at $1.53B and enterprise value at $5.43B).
4. Nokia (NYS: NOK) : Provides Internet and digital mapping and navigation services worldwide. Market cap of $19.71B. Country: Finland. Levered free cash flow/enterprise value at 28.04% (levered free cash flow at $3.51B and enterprise value at $12.52B).
5. Allied World Assurance Company Holdings (NYS: AWH) : Operates as a specialty insurance and reinsurance company in Bermuda, Hong Kong, Ireland, Singapore, Switzerland, the United Kingdom, and the United States. Market cap of $2.25B. Country: Switzerland. Levered free cash flow/enterprise value at 24.22% (levered free cash flow at $-1.24B and enterprise value at $-5.12B).
6. Statoil (NYS: STO) : Engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products. Market cap of $84.98B. Country: Norway. Levered free cash flow/enterprise value at 19.90% (levered free cash flow at $17.40B and enterprise value at $87.44B).
7. AstraZeneca (NYS: AZN) : Develops, and commercializes prescription medicines for cardiovascular, gastrointestinal, infection, neuroscience, oncology, and respiratory and inflammation diseases worldwide. Market cap of $60.15B. Country: United Kingdom. Levered free cash flow/enterprise value at 12.80% (levered free cash flow at $7.61B and enterprise value at $59.43B).
8. Foster Wheeler (NAS: 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. Market cap of $2.26B. Country: Switzerland. Levered free cash flow/enterprise value at 12.19% (levered free cash flow at $180.47M and enterprise value at $1.48B).
9. France Telecom (NYS: FTE) : Provides fixed telephony and mobile telecommunications, data transmission, Internet and multimedia, and other value-added services to consumers, businesses, and telecommunications operators. Market cap of $44.27B. Country: France. Levered free cash flow/enterprise value at 10.77% (levered free cash flow at $9.44B and enterprise value at $87.66B).
10. Elster Group (NYS: ELT) : Provides gas, electricity, and water meters and related communications, networking, and software solutions. Market cap of $1.40B. Country: Germany. Levered free cash flow/enterprise value at 10.45% (levered free cash flow at $198.47M and enterprise value at $1.90B).
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Levered free cashflow data sourced from Yahoo Finance, rest of data sourced from Finviz.
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