3 European Stocks Trading at Discounts Over 40%: A Contrarian Opportunity?

The European equity market, buffeted by geopolitical tensions, inflationary pressures, and volatile commodity cycles, has created unexpected opportunities for contrarian investors. Among the most intriguing are three companies—Mips AB, BFF Bank S.p.A., and Glencore plc—currently trading at discounts exceeding 40% to their estimated fair values, according to Morningstar’s April 2025 analysis. These valuations reflect market pessimism, but they also signal potential for outsized returns if underlying fundamentals improve.

1. Mips AB (OM:MIPS): A Safety Tech Play with Explosive Growth Prospects

Mips AB, a Swedish developer of helmet-based safety systems, is the most undervalued stock in the group, trading at a 49.2% discount to its fair value. Its current share price of SEK 345.6 lags far behind Morningstar’s SEK 679.81 estimate, a gap that suggests the market is overlooking its growth trajectory.

The company’s products, which use advanced sensors to reduce brain injury risks, are gaining traction in high-demand sectors like cycling, skiing, and e-sports. Revenue from its core Sporting Goods segment hit SEK 483 million in 2024, and analysts project 34.8% annual earnings growth and 26.4% revenue growth, outpacing Sweden’s broader economic expansion.

Despite its low dividend yield (1.88%) and reliance on high growth to justify its valuation, Mips’s undervaluation appears starkly mispriced. A **** would likely show a sharp divergence post-2023, as market sentiment lagged behind its R&D progress. Investors should weigh its product pipeline against execution risks in a highly competitive market.

2. BFF Bank S.p.A. (BIT:BFF): A Contrarian Play in European Factoring

BFF Bank, an Italian non-recourse factoring specialist, trades at a 48.7% discount to its fair value of €14.09, reflecting skepticism about its debt-heavy balance sheet. The bank’s niche focus—providing liquidity to public administration bodies and private hospitals—has driven earnings growth from €171.66 million in 2023 to €215.68 million in 2024.

Its modest revenue growth (5.4% annually) and €7.23 current share price suggest the market is pricing in downside risks. Key concerns include a debt-to-equity ratio of 2.1x and an inconsistent dividend history. However, the bank’s specialized customer base in healthcare and government contracts offers a defensive moat in a low-growth economy.

While its leverage ratio is a red flag, the stock’s deep discount may compensate for downside risk if the bank stabilizes its capital structure. Investors seeking exposure to Europe’s public-sector financing needs should analyze this carefully.

3. Glencore plc (LON:GLEN): A Commodity Cyclical at a 43% Discount

Glencore, the Swiss-based metals and mining giant, trades at a 43% discount to its revised fair value of GBX 460. The stock’s slump—down 29.26% over three months and 45.18% annually in 2024—reflects market anxiety over commodity price volatility and geopolitical risks like China’s demand slowdown.

Yet, Morningstar’s downgrade of its fair value estimate to GBX 460 from GBX 550 earlier in 2024 highlights the extreme pessimism baked into its valuation. Glencore’s asset-rich balance sheet, including stakes in copper and cobalt reserves, could prove undervalued if commodity cycles turn.

The 43% discount also factors in a high uncertainty rating (Morningstar’s highest risk tier), but bulls argue that the stock’s price-to-book ratio of 0.6x is historically cheap. However, investors must accept that Glencore’s performance hinges on macroeconomic factors beyond its control.

The Fourth Contender: BMW Group (DE:BMW)

BMW also merits mention, trading at a 41% discount to its €117 fair value estimate. While its valuation is compelling, its lower discount rank (fourth) reflects challenges in the automotive sector, including EV transition costs and supply chain bottlenecks.

Conclusion: Opportunistic, but Not Without Risks

The three stocks highlighted—Mips, BFF Bank, and Glencore—present a compelling contrarian thesis, but their success hinges on distinct catalysts. Mips’s valuation requires sustained innovation and market penetration, BFF Bank’s recovery depends on deleveraging, and Glencore’s rebound is tied to commodity cycles.

Investors should note that 40%+ discounts often materialize only during periods of extreme pessimism, and these stocks may face further headwinds. For example, Mips’s 85.2% projected price upside assumes no setbacks in its R&D pipeline, while BFF Bank’s debt levels and Glencore’s geopolitical risks could amplify losses.

Morningstar’s data underscores that these stocks are rated 4 or 5 stars (undervalued), but **** would show a small universe, emphasizing their rarity. For a diversified portfolio, allocating a small percentage to these names—while maintaining a long-term horizon—could yield asymmetric rewards.

In short, these discounts are not accidents. They are invitations for investors willing to endure volatility and bet on a market correction. Just remember: even in value investing, due diligence is the price of admission.