Key Takeaways
- 14 Nordic companies have been assigned wide economic moats by Morningstar analysts.
- Only four of these stocks currently look undervalued.
- Industrials dominate the list, with healthcare, chemicals, and defense names making up the rest.
Companies that have a wide economic moat have a durable, material competitive advantage that allows a company to earn excess returns on capital for a long period of time and keep competitors at bay. Morningstar analysts assign every company they cover an
Of the 46 Nordic stocks that Morningstar’s analysts cover, 14 have been assigned wide moats, and four of those are seen as undervalued.
The list skews heavily toward industrial stocks. Eight of the 14 wide-moat stocks are machinery, tools, or equipment makers, and two more sit in aerospace and defense. The remainder span medical devices, pharmaceuticals, specialty chemicals, and security services.
A star rating indicates whether a stock is cheap, expensive, or fairly priced compared with an analyst’s estimate of its fair value. Stocks trading at a discount to their fair value estimates receive higher ratings (4 or 5 stars), while those trading at a premium get lower ones (1 or 2 stars). A 3-star rating indicates that the current share price is close to the fair value estimate.
4 Undervalued Nordic Stocks with Wide Moats
Elekta EKTA.B
- Morningstar Rating: ★★★★★
- Fair Value Estimate: SEK 100.00
- Morningstar Uncertainty Rating: Medium
- Discount to Fair Value: 51%
- Industry: Medical Devices
Elekta develops, manufactures, and distributes treatment planning systems for neurosurgery and radiotherapy, including stereotactic radiosurgery and brachytherapy. The company has an installed base of more than 7,300 linear accelerators, Gamma Knife and Unity platforms, as well as brachytherapy installations.
Globally, only a few companies are involved in radiotherapy, with Siemens Healthineers and Elekta accounting for the greatest share of all new installations. The market for radiotherapy equipment is characterized by very high barriers to entry, owing to significant intellectual property and technological know-how, and high switching costs that arise from significant training costs and disruption risk. What started a few decades ago as a rather fragmented field has now evolved into essentially a duopoly; with virtually no new entrants for more than a decade, the two main players have built durable franchises and wide economic moats around their businesses. Healthineers is the largest radiotherapy manufacturer, with more than 50% market share globally and an even more dominant position in the US, controlling more than 70% of all installations. Elekta is the second-largest player, with roughly one-third of the world’s radiotherapy installations.
- Alex Morozov, CFA, Regional Director.
Kone KNEBV
- Morningstar Rating: ★★★★
- Fair Value Estimate: EUR 60.00
- Morningstar Uncertainty Rating: Low
- Discount to Fair Value: 16%
- Industry: Specialty Industrial Machinery
Kone is a global top-four supplier of elevators and escalators. Kone began producing elevators in Finland in 1918 and today generates revenue in three ways: selling new elevators and escalators, modernizing old equipment, and servicing its installed base. Most of the company’s profit comes from the last activity, where contracts are rolled over annually with built-in price increases.
We assign Kone a wide economic moat rating based on its intangible assets (trusted brand and record) and the switching costs inherent in its service business. The elevator and escalator industry is a highly consolidated oligopoly, with Kone, Otis, Schindler, and TK Elevator holding about 70% of the global new equipment market. Global annual renewal rates exceed 90% and are even higher in mature, developed markets.
- Joachim Kotze, CFA, Equity Analyst.
SKF SKF.B
- Morningstar Rating: ★★★★
- Fair Value Estimate: SEK 285.00
- Morningstar Uncertainty Rating: Medium
- Discount to Fair Value: 10%
- Industry: Tools & Accessories
SKF is a global leader in industrial bearings and rotating equipment solutions, operating in segments where reliability, efficiency, and engineering know-how matter most. We assign SKF a wide moat rating based on intangible assets (engineering expertise and global brand reputation) and switching costs stemming from its large installed base and integrated service offering. Our assessment focuses on the Industrial division, which accounts for roughly 70% of group sales and close to 90% of operating profit.
The global bearing market is fairly consolidated, dominated by a handful of suppliers with global reach and technical credibility. SKF is the largest player in industrial bearings, holding an estimated 20% share of the global market. The company’s aftermarket business accounts for 47% of group sales and more than 50% of Industrial sales, providing recurring revenue through maintenance, mechanical services, predictive monitoring, and remanufacturing. The Automotive business is being separated into a stand-alone company by 2026, which will further sharpen SKF’s focus on the higher-quality industrial segment.
- Joachim Kotze, CFA, Equity Analyst.
Kongsberg Gruppen KOG
- Morningstar Rating: ★★★★
- Fair Value Estimate: NOK 329.00
- Morningstar Uncertainty Rating: Medium
- Discount to Fair Value: 11%
- Industry: Aerospace & Defense
Kongsberg Gruppen is an international technology company focused on defense, aerospace, and advanced sensing and surveillance solutions following the spinoff of its maritime business. The group’s activities are centered on Kongsberg Defence & Aerospace and Kongsberg Discovery, providing defense systems, missiles, air defense, and subsea and monitoring technologies.
The group’s moat is now fully anchored in defense, where barriers to entry are structurally higher and returns more durable. We assign a wide moat rating to Kongsberg based on switching costs and intangible assets in the form of engineering and technical know-how, and long-standing relationships with customers. Moreover, Kongsberg has created a comprehensive portfolio of products and services, deliberately avoiding an overreliance on any single program. The land system division is renowned for its remote-controlled weapon stations and tower systems, which allow soldiers to operate from a protected position inside a vehicle. Kongsberg is the leading global supplier with 80% of the global market share and 100% share of the remote weapon stations in the US as the sole supplier for the last 15 years for the delivery of Common Remotely Operated Weapon Stations for the US Army.
- Loredana Muharremi, CFA, Equity Analyst.
