Is Aptiv (APTV) the most undervalued European company worth investing in right now?

We recently created a list 7 undervalued European shares worth investing in now. In this article, we’ll take a look at where Aptiv (NYSE:APTV) ranks among the undervalued European stocks worth investing in right now.

Europe’s economic prospects

According to the European Commission’s economic forecast, the European economy has recovered again in early 2024 after a long period of stagnation. The estimated growth rate of 0.3% for the first quarter of 2024 was still below potential, but exceeded expectations. The EU economy is expected to grow by 1.0% in 2024 and 1.6% in 2025, while in the euro area it will grow by 0.8% in 2024 and 1.4% in 2025.

Inflation across the EU cooled further in the first quarter, with inflation expected to fall from 6.4% in 2023 to 2.7% in 2024 and 2.2% in 2025. The European Central Bank will cut interest rates, with markets expecting a more gradual pace of rate cuts than previously expected. Private consumption is expected to grow by 1.3% in 2024 and 1.7% in 2025, driven by further increases in wages and employment. Investment is expected to increase modestly in 2024 before accelerating in 2025, driven by government infrastructure spending and the gradual expansion of investment activity.

EU external demand is expected to increase, supported by a strong recovery in economic activity in China and a recovery in global goods trade. EU exports of goods and services are expected to grow by 1.4% this year and by 3.1% in 2025. The EU budget deficit is expected to start falling again in 2024 and 2025 as energy-related measures are phased out and gradual improvement in business activities. The EU’s fiscal stance is expected to be restrictive in 2024 and broadly neutral in 2025.

The European market is underestimated and overlooked

Nicholas Hyett, investment manager at Wealth Club, one of the leading investment services companies in the UK, is optimistic about the European economy, especially the British economy, entering 2024. He notes that the British market is undervalued and is trading 40% lower lower in the U.S. and believes there are growth opportunities in sectors such as consumer goods and industrials. Although the UK market is perceived as outdated, Hyett says it is more dynamic than it seems, with many companies being significantly cheaper than their US counterparts.

Hyett admits that the UK market is often associated with traditional industries such as oil and gas and mining, which have had a strong run in recent years. But he believes many other sectors, such as consumer goods and industrials, are poised for growth. These sectors have been overlooked by investors in recent years, but Hyett believes they have the potential to perform well in a strong 2024.

The story continues

One of the main concerns of investors in 2024 is electoral uncertainty. The US presidential elections are expected to be a major event, with elections taking place in Europe. However, Hyett believes that the uncertainty surrounding these choices has already been factored into the market price. He notes that the UK and European elections are likely to be less worrying than the US elections and that the market is already reflecting this.

As for interest rates, Hyett expects them to cut in the second half of 2024 and believes this is a reasonable expectation. However, he emphasizes that the timing and scope of interest rate cuts will depend on the economic outlook. If the economy weakens, rate cuts are likely to be more aggressive. On the other hand, if the economy is stronger than expected, then interest rate cuts may be more gradual. Hyett notes that inflation is expected to decline significantly in 2024, which could lead to interest rate cuts. However, it also notes that the market is already pricing in a significant decline in inflation, and the timing and extent of interest rate cuts will depend on actual inflation data.

The European economy will recover modestly in 2024 and 2025, driven by a number of factors, including a rebound in private consumption, investment and external demand. Although growth rates are expected to remain below potential, the European Commission’s economic forecasts suggest that the EU economy is on track to recover from long-term stagnation. With this in mind, let’s take a look at 7 undervalued European shares worth investing in now.

Our methodology

To compile our list of 7 undervalued European stocks to invest in now, we used Finviz and Yahoo’s screening tools to find the 40 largest European companies. For this list, we searched for companies that were trading at a forward P/E ratio below 15 as of September 26. We then narrowed the selection to 7 stocks based on their hedge fund sentiment, which were pulled from our database of 912 companies. elite hedge funds as of Q2 2024 The list is sorted ascending by hedge fund sentiment as of Q2.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the best stocks of the best hedge funds. As part of our quarterly newsletter strategy, we select 14 small- and large-cap companies every quarter, and since May 2014, we have returned 275%, outperforming our benchmark by 150 percentage points (see more details here).

Aptiv (NYSE:APTV)

Number of hedge fund investors: 38

Forward P/E ratio as of September 26: 11.52

Aptiv (NYSE:APTV) is a leading global technology company providing solutions for a variety of industries, including transportation, aerospace and defense, telecommunications and industrial markets. The company delivers world-class products, platforms and complete system solutions through a variety of brands including Aptiv, Wind River, HellermannTyton, Intercable Automotive Solutions and Winchester Interconnect. Aptiv (NYSE:APTV) is known for its innovations in autonomous vehicles and electric vehicle architectures. The company’s products help reduce the complexity of vehicle systems, improving vehicle safety and efficiency.

On August 13, Aptiv (NYSE:APTV) celebrated the expansion of its manufacturing facility in Chennai, India. The expanded facility, which will produce state-of-the-art cockpit control systems, will increase the company’s production capacity and enable it to supply high-quality components to key automakers in India and global markets.

The expansion is expected to strengthen Aptiv’s (NYSE:APTV) position as a key automotive partner in India and drive innovation in one of the fastest-growing markets in the world. With the expanded factory, Aptiv (NYSE:APTV) will be able to produce advanced safety and user experience features such as radars, cameras and next-generation electronic control units that will help the company stay ahead of the competition and meet the growing demand for software-defined vehicles.

Aptiv (NYSE:APTV) trades at 11.52 times its earnings, which is a 31.60% discount to the sector median of 16.84. This year, the company’s profits are expected to increase by 24.86%. At the end of the second quarter, the company’s shares were owned by 38 hedge funds, whose holdings amounted to $1.02 billion. As of June 30, the company’s largest shareholder is Impax Asset Management, with shares worth $437.86 million. Analysts maintain a consensus Buy rating on the stock, and the $91.34 average price target implies an upside of 25.67%.

APTV in general ranks 6th on our list of undervalued European stocks worth investing in now. While we see APTV’s growth potential, we believe AI stocks have a better chance of delivering higher returns, faster. If you’re looking for an AI stock that has more promise than APTV but is trading less than 5 times higher, check out our report on cheapest AI stocks.

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Disclosure. Nothing. This article was originally published on Insider Monkey.