- UK equity managers predict mid-size companies to outperform in 2026 due to moderating inflation and interest rate cuts, with UK mid-cap stocks offering cheaper valuations.
- 14 companies in the Morningstar Mid-Cap Index are currently undervalued, with one stock, Croda International, being significantly undervalued with a Morningstar Rating of 5 stars.
- Croda International, the most undervalued stock in the UK Mid-Cap Index, is trading 47% below its fair value estimate, driven by strong sales growth in beauty and crop protection.
- Advertising agency WPP is trading 33% below fair value, with negative organic growth in recent quarters prompting caution from analysts.
- Bunzl, the largest distributor of nonfood consumables worldwide, is trading 33% below fair value with a narrow economic moat, despite challenges in North America.
- Barratt Redrow, a housebuilder, is trading 32% below its fair value estimate, poised to capitalize on demand for new homes in the UK despite lacking an economic moat.
- Defense company Melrose Industries is trading 30% below fair value, with the only wide economic moat among the most undervalued mid-cap stocks.
- Morningstar’s indexes classify large and mid-cap stocks based on market capitalization percentages, with the Morningstar Mid-Cap Index including 72 stocks that fall between 70% and 90% of the UK’s investable universe.
Read more at Morningstar: Which UK Mid-Cap Stocks Are Undervalued?