Key Takeaways
- Morningstar Spain was the most expensive market index, while Morningstar Denmark was the cheapest.
- The most overvalued European stock markets outperformed, while the most undervalued stock markets struggled.
- Real estate and communication services remained the most undervalued sectors, while financials and utilities were at modest premiums.
European equity markets delivered mixed results in November, with the Morningstar Europe Index rising less thank 1% in euros over the month. In the year to the end of November, the index is nearly 17% higher, positioning it for its best annual gain since 2021, when it climbed 25.58%.
As has been the case for much of 2025, aggregate index performance obscured wide differences at the country level.
As of Nov. 30, European equities were trading at a price/fair value ratio of 0.96, implying that the market is around 4% undervalued. While the valuation gap versus fair value has narrowed compared with earlier in the year, dispersion across countries and sectors remains elevated.
Expensive European Stock Markets Outperformed in November
November was notable for the strong performance of several of Europe’s most overvalued equity markets. Belgium, trading at a price/fair value ratio of 1.11, was the best-performing market in Europe during the month, posting a gain of 3.6%. Spain, the most overvalued market overall at 1.12, also delivered strong returns, rising 2.7%.
Spain remained the most overvalued equity market in Europe, largely reflecting the dominance of a few heavyweight stocks trading at clear premiums to fair value. Financials such as Banco Santander SAN and BBVA BBVA, together with Iberdrola IBE in utilities and Inditex ITX in consumer cyclical, all trade well above Morningstar’s fair value estimates, pushing the overall market valuation well into overvalued territory.
Belgium’s elevated market valuation is largely driven by its concentrated index structure, with a handful of large constituents trading at meaningful premiums to fair value. While Anheuser-Busch InBev ABI, the largest holding, trades at a discount, heavyweight healthcare stocks such as argenx ARGX, UCB UCB, and KBC KBC are all priced well above Morningstar’s fair value estimates.
Undervalued European Stock Markets Underperformed
By contrast, several markets trading at meaningful discounts to fair value underperformed during November. The Netherlands, valued at 0.89, declined 2.2%, while Finland fell 1.4%, despite both markets being at a double-digit discounts to fair value. Germany, also undervalued at 0.91, ended the month slightly lower.
Markets trading closer to fair value produced more subdued results. Italy posted a gain of 1.4%, while the UK rose 0.8%. France ended the month broadly flat, despite trading slightly below fair value.
Most Overvalued and Undervalued European Stock Sectors
At the sector level, valuations were broadly stable compared with the end of October. Real estate remained the most undervalued sector, trading at a price/fair value ratio of 0.74. Communication services also traded at a meaningful discount, with a ratio of 0.86.
Among more defensive areas, financial services remained modestly overvalued at 1.05, while utilities traded at 1.04.
Which European Stock Values Changed?
Fair value estimates for Europe’s largest companies were broadly stable during November, with Morningstar analysts making only a small number of revisions among the top 20 constituents of the Morningstar Europe Index.
For the majority of large-cap stocks, fair value estimates remained unchanged month over month. Key holdings such as ASML ASML, AstraZeneca AZN, Roche ROG, Nestlé NESN, or SAP SAP all saw no change in their fair value.
There were only two notable exceptions. Allianz ALV saw its fair value estimate increased to €361 from €353, reflecting improved earnings visibility.
Henry Heathfield, equity analyst for Morningstar, says: “For the third quarter of 2025, Allianz has delivered another good financial performance and raised its guidance for the full year. While third-quarter operating profit of €4.3 billion is a touch over company-compiled consensus, it is a double-digit percentage higher than the third quarter last year. As a result, Allianz has increased its guidance to over €17 billion for the full year.”
By contrast, Novo Nordisk NOVO B experienced a meaningful downward revision, with its fair value estimate reduced to 423 from 458 DKK.
Explaining this downward revision, Morningstar analyst Karen Andersen says: “We’re lowering our fair value estimate after factoring in the Nov. 6 pricing deal with the Trump administration for obesity drugs starting in 2026, positive data for Lilly’s potential competing amylin agonist eloralintide, and a shorter potential lead time for oral semaglutide versus Lilly’s orforglipron in the US oral obesity drug market in 2026.”
The company has now a price/fair value of 0.71 and this explains why the Danish market in the cheapest market in Europe.
