Key Takeaways
- Durable competitive advantages can support long-term value creation.
- Brand strength, switching costs, and industry dynamics can help protect profitability from competitors.
- Most wide-moat stocks in the region are fairly valued, or even expensive.
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 economic moat rating of wide, narrow, or none.
Out of the 46 Nordic stocks that Morningstar’s analysts have under coverage, 14 have been assigned a wide economic moat.
The wide-moat companies operate in sectors ranging from medical products, specialized industrial machinery, safety and security services to aerospace and defense. Among the stocks with a wide economic moat, several are considered fairly valued, while only two are undervalued—trading at a discount to Morningstar’s fair value estimate.
The star rating that indicates whether a stock is cheap, expensive or fairly priced compared to the analyst’s assessment of its intrinsic value, or the estimate of its fair value. Stocks trading at large discounts to their fair values receive the highest ratings of 4 or 5 stars, while stocks trading at large premiums to their fair values receive lower ratings of 1 or 2 stars. A 3-star rating indicates that the current share price is close to the analyst’s estimate of fair value.
Undervalued Nordic Stocks with a Wide Moat
Here’s a little bit about the two undervalued wide moat stocks, along with some key Morningstar metrics.
Elekta EKTA B
- Morningstar Rating: ★★★★★
- Fair Value Estimate: SEK 80.00
- Morningstar Uncertainty Rating: Medium
- Discount to Fair Value: 36%
- Industry: Medical Devices
Sweden-based Elekta develops, manufactures, and distributes treatment planning systems for neurosurgery and radiotherapy, including stereotactic radiosurgery and brachytherapy.
Elekta refreshed its product lineup, but the turnaround will take longer than we anticipated.
We’re lowering our fair value estimate to SEK 80 per share from SEK 100 as the turnaround process will take longer than initially anticipated. We still believe there is significant upside to the shares at the current levels, but we acknowledge the market’s lack of confidence in the company.
Kone KNEBV
- Morningstar Rating: ★★★★
- Fair Value Estimate: EUR 60.00
- Morningstar Uncertainty Rating: Low
- Discount to Fair Value: 16%
- Industry: Specialty Industrial Machinery
We assign Kone a Wide Morningstar Economic Moat Rating based on its intangible assets (trusted brand and record) and the switching costs inherent in its service business. These advantages allow Kone to achieve durable economic profits in a structurally consolidated, mature, and capital-light industry.
The elevator and escalator industry is a highly consolidated oligopoly, with Kone, Otis, Schindler, and TK Elevator holding approximately 70% of the global new equipment market. While the service market is more fragmented, especially in emerging markets, OEMs capture a greater value share by servicing high-rise and complex buildings beyond most independent service providers’ capabilities. This industry structure fosters rational pricing and durable excess returns.
