European equities have delivered solid returns so far this year, with the Morningstar Europe Index gaining 7.1% in euros through June 24. However, beneath the surface, a number of individual stocks have significantly outperformed the broader market. While strong share price performance is not necessarily a sign of overvaluation, some companies have seen their valuations become increasingly stretched as investor enthusiasm has pushed prices well beyond Morningstar analysts’ estimates of intrinsic value.
The Morningstar Europe Index remains slightly undervalued overall, trading at a price/fair value ratio of 0.95. This analysis identifies some of the largest European stocks whose recent gains have left them trading at substantial premiums to their estimated intrinsic value.
While the index as a whole appears slightly undervalued, valuation dispersion across individual stocks remains significant. Of the 320 European stocks for which Morningstar’s equity analysts calculate this metric, 113 trade at a price/fair value ratio above 1, indicating overvaluation.
Large European Stocks That Trade at a High Premium
Another way to identify overpriced companies is through the Morningstar Rating. The rating is determined by three factors: a stock’s price, its fair value estimate—Morningstar’s estimate of its intrinsic worth—and its Uncertainty Rating, which captures the range of potential outcomes for that estimate. Stocks rated 4 or 5 stars are considered undervalued, those rated 3 stars are fairly valued, and the ones rated 1 or 2 stars are considered overvalued.
As of June 19, 2026, there are nine stocks with a 1-star rating and 51 stocks with a 2-star rating. That makes 60 companies trading in overvalued territory.
From this sub-universe of 60 stocks, the companies with the highest market cap that outperformed the Morningstar Europe Index over the past 6 months were identified. The resulting list highlights stocks whose recent share-price gains have been accompanied by increasingly stretched valuations, suggesting that investor optimism may have run ahead of underlying fundamentals.
Key Morningstar Metrics for ASML ASML
- Sector: Technology
- Morningstar Rating: ★★
- Price/Fair Value: 1.38
- Morningstar Uncertainty Rating: High
Key Morningstar Metrics for Siemens AG SIE
- Sector: Industrials
- Morningstar Rating: ★★
- Price/Fair Value: 1.14
- Morningstar Uncertainty Rating: Medium
Key Morningstar Metrics for Banco Santander SAN
- Sector: Financial Services
- Morningstar Rating: ★★
- Price/Fair Value: 1.48
- Morningstar Uncertainty Rating: High
Key Morningstar Metrics for Schneider Electric SU
- Sector: Industrials
- Morningstar Rating: ★★
- Price/Fair Value: 1.16
- Morningstar Uncertainty Rating: Medium
Key Morningstar Metrics for ABB ABBN
- Sector: Industrials
- Morningstar Rating: ★
- Price/Fair Value: 1.45
- Morningstar Uncertainty Rating: Medium
Using the Morningstar Price/Fair Value Ratio to Identify Overvalued Stocks
A key part of Morningstar’s equity research process is the price/fair value ratio, a simple but powerful measure that compares a stock’s current market price with Morningstar’s estimate of its intrinsic value. A ratio of 1 indicates that a stock is trading exactly at fair value. Ratios above 1 suggest that investors are paying more than Morningstar believes the business is worth, while ratios below 1 indicate potential undervaluation. Unlike traditional valuation metrics such as price/earnings or price/book ratios, Morningstar’s fair value estimate is derived from a discounted cash flow model that seeks to capture the present value of all future cash flows a company is expected to generate.
The stocks selected for this analysis all exhibit price/fair value ratios well above 1.
A stock’s price/fair value ratio can rise for several reasons. The most obvious is a share-price increase that outpaces changes in the company’s intrinsic value.
However, the ratio can also rise when Morningstar analysts lower their fair value estimate, reflecting weaker business fundamentals or less favorable long-term assumptions.
