European Value Investing Opportunities: 3 Undervalued Stocks With Strong Cash Flow Potential

In the realm of deep value investing, discounted cash flow (DCF) analysis remains a cornerstone for identifying mispriced assets. By projecting future cash flows and discounting them to present value, investors can uncover companies trading at significant discounts to their intrinsic worth. Three European stocks—Coloplast (CLPBF), Adidas (ADDYY), and Nordex (NRDXF)—stand out as compelling opportunities, supported by robust earnings growth forecasts, operational restructurings, and improving cash flow dynamics.

1. Coloplast: A Med-Tech Powerhouse With Resilient Cash Flows

Coloplast, a Danish medical technology firm, has demonstrated remarkable resilience in 2025. The company reported DKK1.9 billion in free cash flow for Q1 FY24/25, a stark improvement from DKK150 million in the prior year, driven by 8% organic growth and a 27% EBIT margin before special items [1]. Despite a product recall in China impacting Q3 2025, the firm maintained 7% organic revenue growth and a stable EBIT margin of 27–28% [1].

A DCF analysis using a 9% discount rate, 5% growth stage rate, and 4% terminal growth rate suggests Coloplast’s intrinsic value is significantly higher than its current market price. With a projected 33% EBITDA margin in FY2025 [3], the company’s operational restructuring—streamlining product development and enhancing customer engagement—positions it for long-term margin expansion. Investors who can stomach short-term volatility are rewarded with a stock trading at a 30% discount to DCF-derived fair value [2].

2. Adidas: A Brand in Transition, Undervalued by 32%

Adidas AG, the German sportswear giant, faces challenges in reshoring production, with 90% of operations still outsourced [1]. However, its financials tell a different story. Deutsche Bank recently raised its 2025 EPS expectations by 7% and 2026 EPS by 9%, citing improved sales forecasts. Constant currency sales growth is now projected at 13% for 2025 and 10.5% for 2026 [5].

A DCF model using a 10-year growth stage and 4% terminal rate estimates Adidas’s intrinsic value at 257.12 EUR per share, compared to its current price of 175.7 EUR—a 32% undervaluation [1]. This gap widens when incorporating relative valuation models, which suggest an intrinsic value of 270.1 EUR [4]. While EBIT margins remain modest at 8.8% for 2025, Adidas’s strong brand equity and strategic focus on high-margin categories (e.g., running and performance) could drive margin expansion.

3. Nordex: A Greentech Turnaround Story

Nordex SE, a leading wind turbine manufacturer, has completed a critical operational restructuring, shifting focus to profitability. Despite a 30% sales increase to EUR1.2 billion in Q1 2025, the company posted a EUR215 million loss, driven by a 0.7% EBITDA margin and -2.3% EBIT margin [1]. However, DCF parameters paint a bullish picture: a 12% revenue growth rate and 11.93% WACC underpin a 9.57B EUR revenue forecast for 2025 [1].

Analysts argue Nordex is trading at 40% of sales, with a 12-month target price of EUR14.45 [3]. A DCF model using a 5% growth stage rate and 4% terminal rate suggests the stock is undervalued by 60% if margins recover to historical averages. The company’s recent contract wins and improved cost structure signal a potential inflection point in H2 2025.

Conclusion: The Case for Deep Value in Europe

Coloplast, Adidas, and Nordex exemplify the power of DCF analysis in uncovering undervalued opportunities. While each faces unique challenges—product recalls, reshoring hurdles, and margin pressures—their strong cash flow generation, strategic restructurings, and favorable DCF parameters justify a long-term investment thesis. For value investors, these stocks represent a rare combination of risk and reward in today’s market.

Source:
[1] Coloplast AS (CLPBF) Q1 2024/25 Earnings Call Transcript [https://www.sec.gov/Archives/edgar/data/1145460/000119312516674184/d78820d10k.htm]
[2] Coloplast AS (CLPBF) DCF Valuation [https://www.gurufocus.com/stock/CLPBF/dcf]
[3] Nordex SE (NRDXF) Price Prediction [https://www.mlq.ai/stocks/NRDXF/price-prediction/]
[4] ADS Intrinsic Valuation and Fundamental Analysis [https://www.alphaspread.com/security/xetra/ads/summary]
[5] Deutsche Bank Lifts Adidas Stock Price Target [https://www.investing.com/news/analyst-ratings/deutsche-bank-lifts-adidas-stock-price-target-to-eur300-93CH-3824571]