Investors looking for ideas don’t necessarily need to venture into the market’s more speculative corners. Some familiar UK and European names are still trading at prices that could offer an attractive entry point.
Regardless of where the markets are headed, investors may want to own companies that offer some sense of certainty in terms of cash flows and company fundamentals. That’s where Morningstar’s Best Companies to Own list comes in. The companies that make up this list have significant competitive advantages. Morningstar analysts believe the best companies have predictable cash flows and are run by management teams that have a history of making smart capital-allocation decisions.
But the best companies aren’t always the best stocks to buy now. How much an investor pays to own a company—best or otherwise—is important, too. So, here we’re focusing on the companies with the most undervalued stock prices today.
10 Best Stocks to Buy Now
The 10 most undervalued European and UK stocks from our Best Companies to Own list as of Sept. 29, 2026, were:
- Rheinmetall RHM
- Universal Music Group UMG
- Melrose Industries MRO
- RELX REL
- LVMH Moët Hennessy Louis Vuitton MC
- Elekta EKTA B
- Pernod Ricard RI
- SAP SAP
- Reckitt Benckiser Group RKT
- Imperial Brands IMB
Here’s a little more about each of the best companies to buy now, including commentary from the Morningstar analysts who cover each company. All data is as of Sept. 29, 2026.
Rheinmetall
- Morningstar Price/Fair Value: 0.40
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Standard
- Industry: Aerospace & Defense
Aerospace and defense company Rheinmetall is the most affordable stock on our list of the best stocks to buy. Rheinmetall is an international defense group supplying military vehicles, weapons and ammunition, air-defense systems, digital military solutions and naval platforms. The stock is trading 60% below our fair value estimate of EUR 2,380 per share.
Rheinmetall became a pure-play defense company after classifying power systems as discontinued operations in December 2025. From 2026, all revenue is generated by defense activities, positioning the group to benefit from the structural increase in European military spending after decades of underinvestment.
NATO members have committed to core defense expenditure of 3.5% of GDP, alongside up to 1.5% for security-related infrastructure. Germany plans to reach the 3.5% threshold by 2029, with annual defense spending expected to approach EUR 180 billion to EUR 190 billion by 2030. The constitutional exemption of defense and security expenditure above 1% of GDP from Germany’s debt brake provides greater funding flexibility.
Rheinmetall is a key supplier to the German armed forces across land systems, ammunition and air defense. The group is also establishing localized production and maintenance capabilities in Ukraine, covering military vehicles, Lynx infantry fighting vehicles and 155 mm ammunition.
Demand for weapons and ammunition remains supported by the war in Ukraine and the replenishment of NATO inventories. Rheinmetall is expanding global 155 mm shell capacity toward 1.1 million-1.5 million rounds annually. The ramp includes the Niedersachsen plant in Unterlüß and new facilities or joint ventures in Lithuania, Latvia, Romania and Bulgaria. Propellant capacity is also planned to reach 20,000 tons, equivalent to around 2 million modular charges, by 2030.
Electronic solutions expanded through major German military-digitization awards, including the EUR 7.5 billion TaWan communications framework and the EUR 1.7 billion IdZ-ES soldier-system contract. Rheinmetall separated the business into air defense and digital systems from January 2026 to support its growing scale.
Outside Europe, the group has established operations in Australia and strengthened its US manufacturing presence through the acquisition of Loc Performance. Rheinmetall created a dedicated US vehicle division in 2026 and remains a contender for the U.S. Army’s XM30 combat-vehicle program, with prototype testing underway and a preferred-system decision expected in late 2026 or early 2027.
Loredana Muharremi, Morningstar analyst
Read more about Rheinmetall here.
Universal Music Group
- Morningstar Price/Fair Value: 0.58
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Exemplary
- Industry: Entertainment
Universal Music is the largest of the three major record companies. The stock is trading at a 42% discount to our fair value estimate of EUR 25 per share.
Universal Music should be a primary beneficiary of ongoing music industry growth we expect. Fears about artificial intelligence-generated music have recently sparked concern that these recordings will take share from the human artists on which Universal relies, but we think these concerns are overstated. Unless consumers are willing to forgo human-created music, the power Universal has over “real” music gives it leverage to continue taking its historical share of revenue on subscription streaming platforms. However, we’ve become less optimistic about the likelihood that streaming revenue continues growing it the rate it did during the first half of the 2020s.
Universal is the largest of the major record companies and currently has an impressive roster of both older and more modern artists. We believe the record companies will remain integral to maximizing recording artists’ earnings, and the moats the major record companies have should enable them to maintain relationships with current stars and continually sign the next generation of talent while also maintaining control of legacy songs and recordings for many years. With Universal’s scale, resources, and current roster, we think it is better positioned than any peer.
Digital music consumption leads to a long tail of revenue generation from the music Universal controls. Recordings generate a continuing source of revenue over many years, as streaming accounts for a major share of consumers’ audio listening time. Streaming music platforms now account for about 60% of Universal’s total revenue, and we expect Universal’s sales to grow along with those of the major streaming providers, as record labels receive a minimum percentage of the platforms’ music revenue, in proportion to the listening share that the labels’ artists generate. Universal’s deals with these providers keep purely AI-generated songs from being included in this revenue pool. With streaming subscription services now regularly raising prices after a decade of flat rates and greater consumer adoption of streaming services, top-line growth for major record companies should have durable growth even as subscriber growth slows.
Matthew Dolgin, Morningstar senior analyst
Read more about Universal Music Group here.
Melrose Industries
- Morningstar Price/Fair Value: 0.59
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Standard
- Industry: Specialty Industrial Machinery
Next on our list of the best stocks to buy is Melrose Industries. Melrose Industries is a UK-based company that manufactures engine and airframe components and systems for all major OEMs across civil and defense markets. The stock is trading at a 41% discount to our fair value estimate of GBX 800 per share.
Melrose Industries, through GKN Aerospace, is a leading Tier 1 supplier of engine and airframe components and systems. More than 70% of airframes content is provided on a sole-source basis. The engines business has positions across 90% of the world’s major aircraft and 19 risk- and revenue-sharing partnerships, or RRSPs, providing aftermarket entitlement on around 70% of global flying hours. Customers include Pratt & Whitney, GE Aerospace, Safran, and Rolls-Royce.
The company benefits from rising aircraft and engine production, growing flight hours, and increasing engine shop visits. Record aircraft backlogs support a multiyear production ramp, while constrained maintenance capacity and the aging installed base maintain aftermarket demand. Newer programs, particularly the GTF, GEnx, and XWB, carry higher GKN participation and expand future aftermarket revenue as their fleets mature.
By 2029, we expect the aftermarket to contribute 57% of engines’ profit, up from an estimated 53% in 2024. Most GKN components are nonrotating parts that last for the engine’s operating life, but its RRSP agreements provide an economic interest in aftermarket sales generated by program partners.
Engines profit growth is driven by higher OE volume, rising RRSP aftermarket receipts, and continued expansion in repairs through additional capacity and multiyear agreements with engine manufacturers. Governmental activity adds growth through support for the Gripen RM12 engine, while additive fabrication expands Melrose’s addressable market and reduces reliance on constrained forged components.
Airframes benefits from rising civil production and defense demand across the F-35, C-130, and NH90. Portfolio restructuring and defense repricing are substantially complete, shifting the focus toward volume conversion, automation, and productivity. We expect these drivers to expand airframes margins toward the low teens by 2029.
Loredana Muharremi, Morningstar analyst
Read more about Melrose Industries here.
RELX
- Morningstar Price/Fair Value: 0.59
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Exemplary
- Industry: Specialty Business Services
RELX is a developer of information-based analytics and decision tools designed to support research, risk assessment, legal work, and business operations. The stock is trading at a 41% discount to our fair value estimate of GBX 4,200 per share.
RELX, based in the UK, is a global provider of business information, analytics, and decision-making tools for professionals in various industries. It generates revenue mainly by creating and selling access to curated information databases, analytics, and journals. In addition, RELX organizes major events such as trade shows and conferences.
Nearly all information and analytics products are delivered digitally; print is now a minor part of the business. Offerings are sold mainly by subscription, which accounts for around 55% of revenue. However, the majority of the remaining 45% of transactional revenue is under long-term contracts with volumetric elements, so essentially recurring in nature.
The core tenet of RELX’s strategy is to grow its portfolio of information-based analytics and decision-making tools to help its customers be more productive and make better decisions in their day-to-day workflow. The company also aims to expand into higher growth adjacencies and geographies organically and through selective acquisitions. Last, RELX focuses on continuous process innovation to manage cost growth below revenue growth.
RELX does not give hard numbers for its strategic targets. Instead, the company aims to deliver an improving revenue and earnings growth profile and higher returns. In our view, investors can typically expect mid-single-digit organic revenue growth and a 10- to 40-basis-point increase in adjusted operating margin each year in what we think is a low-uncertainty business.
Rob Hales, Morningstar senior analyst
LVMH Moët Hennessy Louis Vuitton
- Morningstar Price/Fair Value: 0.64
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Standard
- Industry: Luxury Goods
LVMH is a global producer and distributor of luxury goods. This cheap stock looks 36% undervalued and has a fair value estimate of EUR 620 per share.
We believe that a portfolio of strong leading brands in several luxury niches grants LVMH Moet Hennessy Louis Vuitton a wide moat and should allow it to generate economic profits well into the future. In fashion and leather goods (over half of the company’s profits), LVMH’s brand intangible assets are backed by the 100-plus-year-old globally recognized Louis Vuitton brand, with long product cycles and fully controlled distribution, as well as several smaller but still iconic brands, including Dior and Loro Piana. In wines and spirits LVMH benefits from strong market share and brand recognition in conspicuous market niches. LVMH’s brands are entrenched in distributors’ supply chains and enjoy bargaining power with suppliers thanks to their size. Long production cycles and high need for inventory in champagnes and cognacs, as well as supply limitation due to land availability, create barriers for new entrants. In the rest of the business, LVMH Group has a smaller presence, but still has several strong brands, such as Dior and Guerlain in perfumes and Bulgari and Tiffany in branded jewelry (we regard entry barriers for luxury jewelry as particularly high).
LVMH brands have a good growth record, having taken market share from competitors in most industries of operation while keeping profitability solid. LVMH’s scale and financial resources to invest behind the brands further differentiate it from peers.
We expect LVMH to continue generating organic growth of 5%-6% in the medium term, driven by increasing wealth and incomes globally, and to enjoy higher growth for its smaller portfolio brands. We expect margins to improve to over 28% from 22% in 2025, driven by outperformance of Louis Vuitton, profitability ramp-up for newly acquired brands, and some operating leverage in other divisions. We believe 2021-23 operating margins were on cyclically elevated levels, boosted by outsize postpandemic demand, strong pricing, and moderate investments, hence a current pullback is not unexpected.
Jelena Sokolova, Morningstar senior analyst
Read more about LVMH Moët Hennessy Louis Vuitton here.
Elekta
- Morningstar Price/Fair Value: 0.66
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Standard
- Industry: Medical Devices
Sweden-based Elekta develops, manufactures, and distributes treatment planning systems for neurosurgery and radiotherapy, including stereotactic radiosurgery and brachytherapy. The stock is trading at a 34% discount to our fair value estimate of SEK 80 per share.
Demand for radiotherapy should stay healthy over the next decade. Elekta stands to benefit from the industrywide tailwind, but its recent performance has been challenging. Siemens Healthineers has been able to gain market share globally due to its size and relationship with large hospital networks. Elekta’s position is still formidable, but the future success hinges on the uptake of its latest product platform, Evo, as well as growing adoption of Unity.
Although radiotherapy is considered a ubiquitous form of cancer treatment, its adoption still has room to increase. RT is highly effective in treating certain cancers at a relatively low cost, but its penetration rates have long been hindered by its side effects and sizable upfront costs. The latest advances in technology—allowing for higher dosage and more precise delivery of radiation and growing awareness of the benefits of RT should significantly expand the marketplace. The RT opportunity is particularly attractive in emerging markets, where its utilization rates significantly trail those in the developed world. We estimate that this market can support twice as many platforms without approaching the developed world’s standard of care. We believe that both Healthineers and Elekta stand to benefit from these trends. Our forecast calls for close to 95% of the world’s RT equipment installations to be provided by these two companies over the next decade.
Historically, Elekta’s differentiated offering relied solely on Unity, which has the potential to materially improve the effectiveness of RT. So far, with still-limited data, Unity is delivering on its promises, but the pace of footprint growth has been slow; a more widespread adoption depends on clinical superiority and reimbursement, both of which have been slow to come. Elekta desperately needs strong uptake of Evo to maintain relative balance with Healthineers. Elekta’s ability to maintain share will depend on innovation, improved market dynamics, and near-flawless execution, which is not guaranteed given the firm’s checkered past.
Alex Morozov, Morningstar director
Pernod Ricard
- Morningstar Price/Fair Value: 0.69
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Standard
- Industry: Beverages - Wineries & Distilleries
Pernod Ricard was formed in 1975 through the merger of Pernod, founded in 1805, and Ricard, created in 1932. The stock is trading at a 31% discount to our fair value estimate of EUR 87 per share.
Pernod Ricard, formed in 1975 through the merger of two French aniseed liqueur makers, has established itself as the world’s number-two distiller through a series of acquisitions. The largest spirits players have expanded and scaled their portfolios over decades, holding up to 250 brands, and we believe there is more consolidation to come. Outside of the top five firms, the industry is highly fragmented, with local players often dominating in niche product categories or local markets. These firms present a new wave of merger opportunities for the industry consolidators, including Pernod, to expand their footprint.
A key motivation for Pernod’s acquisition strategy is broadening its product portfolio, which is critical in the on-trade (bars, restaurants, pubs). Volume in the spirits industry is more cyclical than beer, and with transient trends. For example, the shift away from white spirits to brown spirits is a reversal of the trend in the 1990s. Pernod’s broad presence across categories, with both global strategic and local niche brands, mitigates the risk to volume from shifting consumer preferences.
Pernod Ricard is also focusing on premiumization, which we think will be a long-term tailwind to both revenue and margins. This involved shedding noncore assets such as strategic wines while investing in higher-value brands. The way Pernod has laddered the pricing structure of brands such as Chivas Regal shows that there is vast scope for “premiumizing” the core brands in the portfolio. While we see spirits taking share from beer and wine as consumers trade up, the cyclicality of the industry can lead to lumpy returns on investment.
Verushka Shetty, Morningstar analyst
Read more about Pernod Ricard here.
SAP
- Morningstar Price/Fair Value: 0.70
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Standard
- Industry: Software - Application
Founded in Germany in 1972 by former IBM employees, SAP is the world’s largest provider of enterprise application software. This cheap stock looks 30% undervalued and has a fair value estimate of EUR 265 per share.
SAP is the world’s largest provider of enterprise application software and global market leader in enterprise resource planning software. The company earns revenue by selling subscriptions for its various cloud-based software-as-a-service products as well as licenses and maintenance fees for on-premises software, which are now being largely phased out. Besides its core ERP products such as S/4HANA, SAP offers well-known back-office software products such as Concur for travel and expense management and Ariba for procurement.
The company was late to the cloud for ERP software but now offers two compelling products: RISE with SAP, which is the private-cloud edition designed for SAP’s large enterprise customers that are transitioning from their SAP on-premises ERP (ECC) to SAP S/4HANA; and GROW with SAP, which is the public cloud edition that is designed for midmarket companies with less complex requirements. We think GROW with SAP fills an important void in SAP’s product offering, as previously SAP’s ERP software was often unattractive to smaller customers given the implementation costs were just too high. With the launch of these new products, cloud revenue is growing swiftly, and SAP is capturing many new midmarket customers.
SAP is following a land and expand strategy, which is common in the enterprise software market. RISE with SAP and GROW with SAP are the land products, after which the company then upsells and cross-sells more SAP products to these customers, which is much easier in a cloud-based model. The company has yet to release its latest long-term ambitions but expects revenue growth to accelerate at least through 2027, along with rising margins as the cloud business reaches efficient scale.
Rob Hales, Morningstar senior analyst
Reckitt Benckiser Group
- Morningstar Price/Fair Value: 0.72
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Standard
- Industry: Household & Personal Products
Reckitt Benckiser was formed in 1999 through the merger of the British firm Reckitt & Colman and Dutch-based Benckiser. This cheap stock looks 28% undervalued and has a fair value estimate of GBX 6,800 per share.
The majority of Reckitt’s portfolio is well positioned in categories that benefit from secular growth drivers across consumer health and hygiene. The acquisition of Mead Johnson has added to its portfolio a leadership position in infant nutrition—a segment with substantial pricing power. However, the timing of the transaction, ahead of a period of declining birthrates and intensified competition in China, posed significant challenges and has dampened revenue growth in the last few years. Management sold the infant nutrition business in China in 2021, and the remaining US-focused infant nutrition business will likely be carved out once the uncertainty around the ongoing premature infant formula litigation is resolved. At the same time, we expect that further secular declines in birthrates in the US will continue to be a drag on the company’s mid-single-digit growth ambitions.
Reckitt’s brands command premium prices in attractive categories across consumer health and home care. Compared with some of its closest competitors, Reckitt has a lower portfolio footprint in laundry care—and especially the somewhat commoditized laundry detergent segment—which partially explains the company’s higher operating margin of mid-20s compared with high teens on average for peers. The automatic dishwashing category, where Reckitt is the undisputed global market leader with the brand Finish, is especially attractive given the very low global penetration of dishwashers and their accelerated adoption, given rising household incomes and increasing awareness of their convenience and resource efficiency benefits.
In the health segment, over-the-counter accounts for almost half of revenue and benefits from secular growth trends such as population aging and rising disposable income in emerging markets. Intimate wellness is another high-growth category that benefits from increasing consumer awareness and social acceptance.
The many changes in leadership and the slew of bad news in recent years have left Reckitt in a somewhat vulnerable position, and the company will benefit from more decisive portfolio interventions and the resolution of legal concerns.
Diana Radu, Morningstar analyst
Read more about Reckitt Benckiser Group here.
Imperial Brands
- Morningstar Price/Fair Value: 0.72
- Morningstar Uncertainty Rating: Medium
- Morningstar Capital Allocation Rating: Standard
- Industry: Tobacco
Tobacco company Imperial Brands rounds out our list of best stocks to buy. Imperial Brands is the world’s fourth-largest international tobacco company (excluding China National Tobacco), with total fiscal 2025 volume of 187 billion cigarettes sold in more than 120 countries. The stock is 28% undervalued relative to our fair value estimate of GBX 3,400 per share.
Imperial Brands has positioned itself as a fast follower in next-generation products while strengthening its share in its most important markets. This makes sense, given its relatively smaller size compared with peers like Philip Morris International and British American Tobacco, which leaves it a smaller budget for innovation. Although this means Imperial will be more exposed to cigarettes (we forecast NGP will contribute just 6% of tobacco and NGP net sales in fiscal 2030), it also means that it can maximize its free cash flow generation and returns to shareholders.
The company has focused its investments on its five most important markets—the US, Germany, the UK, Spain, and Australia—which collectively represent about 70% of operating profit. This has led to small market share gains, bucking the trend seen in the years before the shift. Moreover, Imperial is leveraging its relatively higher exposure to value brands for customers who opt to trade down. In next-generation products, the company has a lagging portfolio. It has exited vaping markets where it did not gain traction and has instead focused its vape, heated tobacco, and oral nicotine products in markets of strength.
Still, Imperial will lag in NGP, which is becoming a significant revenue contributor to its larger peers. This means that not only will the company trade at a lower multiple due to lagging growth, but it will be more vulnerable to the secular decline of cigarettes, as its volume waned about 5% annually over the past five years. However, economic headwinds are driving consumer trade-down, benefiting Imperial’s value brands. Moreover, price increases have generally been able to offset this decline, though, and we expect Imperial to continue these for the foreseeable future, given the relative affordability of cigarettes in its focus markets and low price elasticity.
This strategy has had a beneficial effect on Imperial’s ability to return capital to shareholders, with the dividend growing about 5% annually and annual share repurchases exceeding GBP 1.1 billion for the past three fiscal years. We think the company can continue such returns comfortably.
Kristoffer Inton, Morningstar senior analyst
Read more about Imperial Brands here.
How to Find More of the Best Stocks to Buy
You can review all of the companies on our Best Companies to Own list and dig into our methodology, which includes definitions for the key Morningstar metrics included in this article. Those with specific interests can drill down with our Best International Companies to Own, Best Sustainable Companies to Own, and Best Innovative Companies to Own lists, too. And as we outline here, we suggest that you focus your research on the undervalued stocks of the companies on these lists.
