Hidden Gems: European Stocks Trading at Steep Discounts Amid Fragile Recovery

FRANKFURT/LONDON – European equities are painting a picture of cautious optimism in early 2026, with the pan-European STOXX 600 Index trending upwards on the back of resilient corporate earnings. Yet, beneath this surface, a significant valuation gap persists. Analysts point to a cohort of companies whose current share prices appear disconnected from their future cash flow potential, creating pockets of opportunity in a market still wrestling with geopolitical headwinds and a measured post-recovery pace.

"The market's focus is split between short-term earnings beats and long-term structural concerns," said Klara Schmidt, a portfolio manager at Rhine Capital Advisors. "This divergence is precisely where value can be found. Investors willing to look through the noise may find quality assets on sale."

A recent screening, identifying over 200 European stocks trading below their estimated fair value based on discounted cash flow models, highlights this disconnect. Here’s a closer look at three standout candidates from the list.

OHLA: A Construction Giant on the Mend

Overview: Spanish conglomerate Obrascón Huarte Lain, S.A. (BME:OHLA), with operations across the Americas and Europe, carries a market capitalization of €496.3 million.
Operations: Revenue streams are dominated by Construction (€3.40 billion) with a smaller Industrial segment (€164.09 million).
The Discount: Trading at €0.36, OHLA's price implies a staggering 32.8% discount to its estimated fair value of €0.53.

The company, while still reporting a net loss, has shown marked improvement, narrowing its deficit to €45.6 million on sales of €2.57 billion for the first nine months of 2025. With earnings forecast to grow at nearly 80% annually and a path to profitability within three years, the current price appears to heavily discount a potential turnaround.

Endúr ASA: Riding Norway's Infrastructure Wave

Overview: Norway's Endúr ASA (OB:ENDUR), specializing in infrastructure and aquaculture solutions, is valued at NOK 4.92 billion.
Operations: Infrastructure is its core (NOK 4.07 billion), supplemented by Aquaculture Solutions (NOK 856.50 million).
The Discount: At NOK 98.4, the stock trades at a 49.5% discount to its estimated fair value of NOK 194.96.

Endúr's financials tell a story of robust growth. Third-quarter revenue skyrocketed to NOK 1.84 billion from NOK 744.3 million year-on-year, while net income surged to NOK 63.9 million from NOK 11.1 million. With earnings growth projected at 35.7% per year—more than double the Norwegian market average—its deep valuation discount raises eyebrows.

Knowit AB: A Digital Consultancy in Disguise

Overview: Swedish consultancy firm Knowit AB (OM:KNOW) focuses on digital transformation and holds a market cap of SEK 3.18 billion.
Operations: Revenue is diversified across Insight (SEK 852M), Solutions (SEK 3.22B), Experience (SEK 1.06B), and Connectivity (SEK 810M).
The Discount: Priced at SEK 116.6, it sits at a 49% discount to its estimated SEK 228.47 fair value.

Despite a recent compression in profit margins, Knowit's earnings are expected to grow by 25.5% annually. Strategic partnerships with energy major Equinor and tech firm Tet Digital underscore its growing clout in the digital solutions space, a potential catalyst not fully reflected in its current valuation.

Market Voices:
"These aren't just statistical quirks," commented Thomas Reed, an independent market analyst in London. "OHLA and Endúr show operational momentum that the market is ignoring, likely due to sector-wide biases. Knowit is a pure play on digitalization—it shouldn't be this cheap."

However, not all are convinced. Anya Petrova, a fund manager known for her skeptical stance, offered a sharp rebuttal: "This is value trap 101. Discounted cash flow models are fantasies built on optimistic forecasts. OHLA is chronically loss-making, Endúr's growth is tied to volatile commodity economies, and Knowit's margins are shrinking. Buying these because a spreadsheet says they're 'cheap' is how investors get poor."

This analysis is based on historical data and analyst projections using an impartial methodology. It is not financial advice nor a recommendation to buy or sell any security, and does not consider individual investment objectives. Investors should conduct their own research, noting that this commentary may not include the latest company-specific announcements.

Originally published by Simply Wall St.