MW 10 stocks to consider if you want alternatives to the expensive S&P 500
By Philip van Doorn
Stocks in developed economies outside the U.S. tend to trade at lower valuations. Some of the companies are expected to expand their businesses rapidly over the next two years.
The S&P 500 trades well above its 10-year average forward price/earnings valuation. The MSCI EAFE ETF trades at a much lower P/E than the S&P 500 and is only slightly above its 10-year average valuation.
The headlines of record highs for U.S. stock indexes continue to flow, but what investors need to worry about is not just high prices in a bull market, but high valuations relative to earnings.
A commonly used metric for stock valuations is the forward price-to-earnings ratio. That is a stock's price divided by the consensus estimate for the next 12 months' earnings per share among analysts working for brokerage firms or research firms.
On this basis, the S&P 500 SPX appears to be expensively priced relative to the index's long-term P/E valuation. But the story is different for stocks of large companies outside the U.S.
Here's a comparison of current forward P/E ratios for the SPDR S&P 500 ETF Trust SPY and the iShares MSCI EAFE ETF EFA with their 10-year average valuations.
ETF Ticker Forward P/E to 10-year average Forward P/E 10-year average P/E
SPDR S&P 500 ETF Trust SPY 120% 22.19 18.49
iShares MSCI EAFE ETF EFA 105% 15.01 14.29
Source: FactSet
There are many funds tracking the S&P 500, but SPY is the oldest exchange-traded fund to track the large-cap U.S. benchmark. It has $655 billion in assets under management. The fund's annual expenses come to 0.0945% of total assets, which means the annual fees for a $10,000 investment come to $9.45. The fund tracks the S&P 500 by holding all of its stocks, weighted by market capitalization. This means it is highly concentrated, with the top five holdings - Nvidia Corp. (NVDA), Microsoft Corp. $(MSFT)$, Apple Inc. $(AAPL)$, two common share classes of Alphabet Inc. $(GOOGL)$ $(GOOG)$, and Amazon.com Inc. (AMZN) - making up 29.1% of the portfolio.
The MSCI EAFE Index XX:990300 includes 693 large-cap and midcap stocks in 21 developed markets excluding the U.S. and Canada, but including Hong Kong. The index is designed to capture "approximately 85% of the free float-adjusted market capitalization" within each of the 21 economies. The iShares MSCI EAFE ETF EFA tracks the index by holding all of its stocks, with an annual expense ratio of 0.32%. And even though this index is also weighted by market cap, it is far less concentrated than the S&P 500. The top five holdings of EFA - ASML Holding NV $(ASML)$, SAP SE (SAP), AstraZeneca PLC $(AZN)$, Novartis AG (CH:NOVN) and Nestle SA (CH:NESN) - make up only 6.8% of the portfolio.
Screening the MSCI EAFE Index
Starting with the 693 companies in the MSCI EAFE Index, we cut the list to 615 stocks covered by at least nine analysts. Then we cut further to limit the group to 188 rated buy or the equivalent among at least two-thirds of the analysts.
For a further cut to give the screen a value-tilt, we excluded stocks with forward P/E ratios higher than 20. This brought the list down to 122 companies.
We then sorted the remaining list by expected compound annual growth rates for revenue from 2025 through 2027. For a uniform set of calendar-year estimates, FactSet adjusted the data for any companies whose fiscal reporting periods don't match the calendar.
Here are the 20 companies passing the screen for which analysts expect the highest revenue CAGR from 2025 through 2027:
Company Ticker Two-year estimated sales CAGR through 2027 Forward P/ECountry Aegon Ltd. NL:AGN 39.6% 7.7Netherlands Elia Group SA/NV BE:ELI 19.5% 16.6Belgium Erste Group Bank AG AT:EBS 17.4% 9.6Austria InPost S.A. NL:INPST 17.3% 12.6Luxembourg Prosus N.V. Class N NL:PRX 16.4% 15.2Netherlands Genmab A/S DK:GMAB 14.8% 14.9Denmark Yangzijiang Shipbuilding Holdings Ltd. SG:BS6 14.5% 7.9China Daiichi Sankyo Co. JP:4568 12.6% 19.6Japan Santos Ltd. AU:STO 12.4% 13.1Australia Swedish Orphan Biovitrum AB SE:SOBI 12.4% 16.2Sweden CVC Capital Partners PLC NL:CVC 10.7% 16.6U.K. Zalando SE DE:ZAL1 10.5% 15.8Germany Infineon Technologies AG DE:IFXA 10.0% 17.4Germany Renesas Electronics Corp. JP:6723 9.3% 11.5Japan National Grid PLC UK:NG 9.2% 12.6U,K, Mowi ASA NO:MOWI 9.0% 13.5Norway AIA Group Ltd. HK:1299 8.7% 13.7Hong Kong Adidas AG DE:ADS1 8.7% 18.0Germany Techtronic Industries Co. HK:669 8.6% 16.4China Barratt Redrow PLC UK:BTRW 8.4% 11.2U.K. Source: FactSet
And here is a summary of analysts' opinions about these stocks. Prices and targets are in local currencies where the stocks are listed:
Company Ticker Sept. 8 price Consensus price target Implied 12-month upside potential Share buy ratings Aegon Ltd. NL:AGN 6.47 6.80 5% 67% Elia Group SA/NV BE:ELI 94.50 111.69 18% 77% Erste Group Bank AG AT:EBS 83.10 85.93 3% 86% InPost S.A. NL:INPST 11.81 18.88 60% 100% Prosus N.V. Class N NL:PRX 53.05 58.53 10% 71% Genmab A/S DK:GMAB 1,739.00 2,002.04 15% 70% Yangzijiang Shipbuilding Holdings Ltd. SG:BS6 3.17 3.36 6% 90% Daiichi Sankyo Co. JP:4568 3,704.00 5,552.67 50% 100% Santos Ltd. AU:STO 7.71 8.32 8% 67% Swedish Orphan Biovitrum AB SE:SOBI 276.00 339.08 23% 80% CVC Capital Partners PLC NL:CVC 15.19 19.52 28% 71% Zalando SE DE:ZAL1 25.93 36.36 40% 75% Infineon Technologies AG DE:IFXA 32.08 42.77 33% 93% Renesas Electronics Corp. JP:6723 1,702.00 2,491.67 46% 79% National Grid PLC UK:NG 10.32 12.01 16% 75% Mowi ASA NO:MOWI 207.40 221.07 7% 73% AIA Group Ltd. HK:1299 73.00 89.44 23% 100% Adidas AG DE:ADS1 182.05 243.64 34% 77% Techtronic Industries Co. HK:669 96.60 115.89 20% 94% Barratt Redrow PLC UK:BTRW 3.69 5.15 40% 95% Source: FactSet
You should do your own research to form your own opinion before making any investment. One way to do that is to click on the tickers for more information about any company, ETF or index in this article.
Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page
MW 10 stocks to consider if you want alternatives to the expensive S&P 500
By Philip van Doorn
Stocks in developed economies outside the U.S. tend to trade at lower valuations. Some of the companies are expected to expand their businesses rapidly over the next two years.
The S&P 500 trades well above its 10-year average forward price/earnings valuation. The MSCI EAFE ETF trades at a much lower P/E than the S&P 500 and is only slightly above its 10-year average valuation.
The headlines of record highs for U.S. stock indexes continue to flow, but what investors need to worry about is not just high prices in a bull market, but high valuations relative to earnings.
A commonly used metric for stock valuations is the forward price-to-earnings ratio. That is a stock's price divided by the consensus estimate for the next 12 months' earnings per share among analysts working for brokerage firms or research firms.
On this basis, the S&P 500 SPX appears to be expensively priced relative to the index's long-term P/E valuation. But the story is different for stocks of large companies outside the U.S.
Here's a comparison of current forward P/E ratios for the SPDR S&P 500 ETF Trust SPY and the iShares MSCI EAFE ETF EFA with their 10-year average valuations.
ETF Ticker Forward P/E to 10-year average Forward P/E 10-year average P/E
SPDR S&P 500 ETF Trust SPY 120% 22.19 18.49
iShares MSCI EAFE ETF EFA 105% 15.01 14.29
Source: FactSet
There are many funds tracking the S&P 500, but SPY is the oldest exchange-traded fund to track the large-cap U.S. benchmark. It has $655 billion in assets under management. The fund's annual expenses come to 0.0945% of total assets, which means the annual fees for a $10,000 investment come to $9.45. The fund tracks the S&P 500 by holding all of its stocks, weighted by market capitalization. This means it is highly concentrated, with the top five holdings - Nvidia Corp. (NVDA), Microsoft Corp. (MSFT), Apple Inc. (AAPL), two common share classes of Alphabet Inc. (GOOGL) (GOOG), and Amazon.com Inc. (AMZN) - making up 29.1% of the portfolio.
The MSCI EAFE Index XX:990300 includes 693 large-cap and midcap stocks in 21 developed markets excluding the U.S. and Canada, but including Hong Kong. The index is designed to capture "approximately 85% of the free float-adjusted market capitalization" within each of the 21 economies. The iShares MSCI EAFE ETF EFA tracks the index by holding all of its stocks, with an annual expense ratio of 0.32%. And even though this index is also weighted by market cap, it is far less concentrated than the S&P 500. The top five holdings of EFA - ASML Holding NV (ASML), SAP SE (SAP), AstraZeneca PLC (AZN), Novartis AG (CH:NOVN) and Nestle SA (CH:NESN) - make up only 6.8% of the portfolio.
Screening the MSCI EAFE Index
Starting with the 693 companies in the MSCI EAFE Index, we cut the list to 615 stocks covered by at least nine analysts. Then we cut further to limit the group to 188 rated buy or the equivalent among at least two-thirds of the analysts.
For a further cut to give the screen a value-tilt, we excluded stocks with forward P/E ratios higher than 20. This brought the list down to 122 companies.
We then sorted the remaining list by expected compound annual growth rates for revenue from 2025 through 2027. For a uniform set of calendar-year estimates, FactSet adjusted the data for any companies whose fiscal reporting periods don't match the calendar.
Here are the 20 companies passing the screen for which analysts expect the highest revenue CAGR from 2025 through 2027:
Company Ticker Two-year estimated sales CAGR through 2027 Forward P/ECountry Aegon Ltd. NL:AGN 39.6% 7.7Netherlands Elia Group SA/NV BE:ELI 19.5% 16.6Belgium Erste Group Bank AG AT:EBS 17.4% 9.6Austria InPost S.A. NL:INPST 17.3% 12.6Luxembourg Prosus N.V. Class N NL:PRX 16.4% 15.2Netherlands Genmab A/S DK:GMAB 14.8% 14.9Denmark Yangzijiang Shipbuilding Holdings Ltd. SG:BS6 14.5% 7.9China Daiichi Sankyo Co. JP:4568 12.6% 19.6Japan Santos Ltd. AU:STO 12.4% 13.1Australia Swedish Orphan Biovitrum AB SE:SOBI 12.4% 16.2Sweden CVC Capital Partners PLC NL:CVC 10.7% 16.6U.K. Zalando SE DE:ZAL1 10.5% 15.8Germany Infineon Technologies AG DE:IFXA 10.0% 17.4Germany Renesas Electronics Corp. JP:6723 9.3% 11.5Japan National Grid PLC UK:NG 9.2% 12.6U,K, Mowi ASA NO:MOWI 9.0% 13.5Norway AIA Group Ltd. HK:1299 8.7% 13.7Hong Kong Adidas AG DE:ADS1 8.7% 18.0Germany Techtronic Industries Co. HK:669 8.6% 16.4China Barratt Redrow PLC UK:BTRW 8.4% 11.2U.K. Source: FactSet
And here is a summary of analysts' opinions about these stocks. Prices and targets are in local currencies where the stocks are listed:
Company Ticker Sept. 8 price Consensus price target Implied 12-month upside potential Share buy ratings
Aegon Ltd. NL:AGN 6.47 6.80 5% 67%
Elia Group SA/NV BE:ELI 94.50 111.69 18% 77%
Erste Group Bank AG AT:EBS 83.10 85.93 3% 86%
InPost S.A. NL:INPST 11.81 18.88 60% 100%
Prosus N.V. Class N NL:PRX 53.05 58.53 10% 71%
Genmab A/S DK:GMAB 1,739.00 2,002.04 15% 70%
Yangzijiang Shipbuilding Holdings Ltd. SG:BS6 3.17 3.36 6% 90%
Daiichi Sankyo Co. JP:4568 3,704.00 5,552.67 50% 100%
Santos Ltd. AU:STO 7.71 8.32 8% 67%
Swedish Orphan Biovitrum AB SE:SOBI 276.00 339.08 23% 80%
CVC Capital Partners PLC NL:CVC 15.19 19.52 28% 71%
Zalando SE DE:ZAL1 25.93 36.36 40% 75%
Infineon Technologies AG DE:IFXA 32.08 42.77 33% 93%
Renesas Electronics Corp. JP:6723 1,702.00 2,491.67 46% 79%
National Grid PLC UK:NG 10.32 12.01 16% 75%
Mowi ASA NO:MOWI 207.40 221.07 7% 73%
AIA Group Ltd. HK:1299 73.00 89.44 23% 100%
Adidas AG DE:ADS1 182.05 243.64 34% 77%
Techtronic Industries Co. HK:669 96.60 115.89 20% 94%
Barratt Redrow PLC UK:BTRW 3.69 5.15 40% 95%
Source: FactSet
You should do your own research to form your own opinion before making any investment. One way to do that is to click on the tickers for more information about any company, ETF or index in this article.
Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page
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September 09, 2025 14:39 ET (18:39 GMT)
MW 10 stocks to consider if you want alternatives -2-
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