High-Conviction European Value Plays: Identifying 3 Severely Undervalued Stocks With Attractive Long-Term Growth Potential

The European equity market in 2025 presents a compelling case for value investors, as macroeconomic stability and sector-specific tailwinds have created fertile ground for capital appreciation. While global markets remain fixated on U.S. megacap dominance, European equities trading at significant discounts to intrinsic value offer asymmetric upside potential. This analysis identifies three high-conviction value plays-MilDef Group (OM:MILDEF), Vitrolife (OM:VITR), and Streamwide (ENXTPA:ALSTW)-each exhibiting robust fundamentals, favorable sector dynamics, and substantial fair value premiums.

1. MilDef Group (OM:MILDEF): A Defense Sector Powerhouse

MilDef Group, a Swedish provider of rugged IT solutions, is trading at SEK136.9, a 47.5% discount to its estimated fair value of SEK222.55. The company's strategic positioning in the defense sector-a domain experiencing unprecedented demand due to geopolitical tensions-positions it as a prime beneficiary of long-term capital reallocation. Q3 2025 results highlighted SEK539.7 million in sales, driven by a SEK320 million NATO contract. Analysts project 83% annual earnings growth over the next three years, fueled by its expansion in Sweden and the broader European defense market.

Sector dynamics further bolster MilDef's case. European governments are accelerating investments in cybersecurity and military infrastructure, with NATO's 2025 budget increases creating a structural tailwind. While risks such as contract dependency exist, the company's recurring revenue model and pricing power in a capital-intensive sector mitigate these concerns.

2. Vitrolife (OM:VITR): Innovation in Assisted Reproduction

Vitrolife, a leader in assisted reproduction products, trades at SEK137.9, 30% below its fair value of SEK197.97. The company's 21.2% annual earnings growth forecast-outpacing the Swedish market's 13.6%-reflects its dominant position in a sector poised for expansion. Despite a SEK5.4 billion goodwill impairment from the Igenomix acquisition and restructuring costs of SEK55 million in Q4 2025, Vitrolife's strategic downsizing is projected to generate SEK65 million in annual savings by Q3 2026.

The assisted reproduction market is expanding due to rising infertility rates and regulatory tailwinds in Europe. Vitrolife's R&D pipeline, including next-generation diagnostic tools, further insulates it from commoditization risks. While near-term revenue growth may moderate, the company's margin expansion and recurring revenue streams from consumables create a durable competitive moat.

3. Streamwide (ENXTPA:ALSTW): Software Sector Undervaluation

Streamwide, a French software company specializing in digital printing solutions, is trading at €73, a 48.9% discount to its estimated fair value of €142.93. The stock's high P/E ratio of 36.3x-elevated relative to its industry peers-reflects underappreciated growth in gross margins and share buybacks. Analysts project expanding operating leverage as the company scales its cloud-based platform, which has attracted high-margin enterprise clients.

The software sector's shift toward SaaS models and AI integration provides a structural tailwind. Streamwide's recent partnerships with industrial clients and its focus on automation technologies position it to capture market share in a sector expected to grow at 12% annually through 2027. Risks include macroeconomic sensitivity, but the company's recurring revenue model and strong balance sheet offer resilience.

Conclusion: A Strategic Case for European Value Investing

The three stocks highlighted above exemplify the opportunities available in European markets for investors willing to look beyond short-term volatility. MilDef Group's defense sector exposure, Vitrolife's innovation-driven growth, and Streamwide's software sector positioning all align with macroeconomic trends that are likely to persist through 2026 and beyond. While each faces unique challenges, their substantial fair value premiums and sector-specific catalysts justify a high-conviction allocation.

As European markets continue to correct for years of underperformance relative to the U.S., these undervalued plays offer a compelling combination of capital preservation and growth potential. For value investors, the current environment represents a rare window to capitalize on mispricings that are likely to be rectified as fundamentals gain broader recognition.