Can investors really uncover more undervalued gems by looking beyond the US stock market? This article dives deep into the nuanced world of international stock valuations, exploring both data-driven insights and hands-on investing experiences. We’ll compare regulatory environments, real-world case studies, and even get a bit lost (and found) in the weeds of “verified trade” standards. By the end, you’ll have a fresh perspective and practical takeaways for approaching global value investing.
If you’re like me, you probably started your investing journey mostly buying US stocks—Apple, Microsoft, a bit of S&P 500 ETF action. It’s comfortable, and the headlines are everywhere. But after years of hunting for undervalued opportunities, you might start to notice something: the easy wins in the US seem to get arbitraged away fast.
So, the big question I set out to answer is: Are international stocks statistically more likely to be undervalued than US equities, or is that just wishful thinking? And just as importantly—what does “undervalued” even mean when accounting standards, legal environments, and trade verification rules differ so much country to country?
Practically speaking, an undervalued stock is one trading below its intrinsic value—as measured by metrics like P/E, P/B, EV/EBITDA, or discounted cash flows. Yet, these numbers can get skewed by local accounting quirks or government interventions. For example, Chinese companies often report profits differently from US GAAP standards, and European firms may have stricter disclosure requirements.
When I tried to compare a French bank to a US bank a few years ago, I was shocked at how different their “book values” looked—largely due to IFRS vs. US GAAP treatment of loan loss provisions. That alone can make a stock look cheaper or pricier on paper, but is it really?
Here’s where it gets tricky. A company’s valuation in the US is propped up by a relatively uniform and transparent system for verifying revenues—think Sarbanes-Oxley, PCAOB audits, and the SEC’s tough stance. Internationally? It’s a patchwork.
To illustrate, check out this simplified comparison:
| Country/Region | "Verified Trade" Legal Basis | Enforcement Body | Notes |
|---|---|---|---|
| USA | Sarbanes-Oxley Act, SEC Rules | SEC, PCAOB | Uniform standards, severe penalties for fraud |
| EU | EU Accounting Directive, IFRS | ESMA, local regulators | Harmonized but some local variations |
| China | CSRC Guidelines | CSRC | Opaque for foreign investors, less rigorous audits |
| Brazil | CVM, IFRS | CVM | Variable enforcement, especially in small caps |
Source: OECD Principles of Corporate Governance, SEC.gov, and local regulatory filings.
Here’s a real-world scenario: In 2019, a European retailer (let’s call it “RetailCo”) sourced goods from a Vietnamese manufacturer. The goods were certified by Vietnam’s local trade authority, but when RetailCo’s auditors tried to verify the export numbers, discrepancies emerged. Under WTO rules (WTO Trade Facilitation Agreement), both sides had different interpretations of “verified trade”—leading to an expensive legal wrangle.
In an email thread I saw on a global trade forum, a compliance officer from RetailCo vented: “We thought we were buying cheap inventory, but the verification cost us more than the ‘savings’ of sourcing outside the EU.” That’s a hidden risk that can impact perceived undervaluation.
I once asked a senior analyst at OECD why international stocks have lower valuations: “You have to price in not just business risk, but system risk—imagine if tomorrow a regulator in Brazil decides to fine your company or change the export verification process. That’s why discounts persist.”
And yes, I’ve made rookie mistakes. In 2020, I bought shares in a Turkish industrial firm because its P/E was under 4. But currency controls changed overnight, and my “undervalued” gem got even cheaper—for reasons I hadn’t modeled. Lesson learned: sometimes, low valuations are rational.
The data does show that, on average, international and emerging market stocks trade at lower valuation multiples than US peers. According to MSCI, as of 2024, developed ex-US stocks had a P/E of ~15x versus the S&P 500’s ~21x. Emerging markets were even lower. But, and it’s a big but, much of this “discount” reflects added risks—ranging from accounting opacity to less robust trade verification and regulatory unpredictability.
If you’re willing to do the work—digging into local filings, talking to regional experts, and stress-testing the verification of reported revenues—you may indeed find more frequent undervaluation abroad. Just don’t expect it to be as simple as “screen for low P/E and buy.”
My experience (and the numbers) suggest that international stocks often appear more undervalued than their US counterparts, but not always for the right reasons. The “value” may be a mirage caused by structural, legal, or verification differences. If you’re serious about international value investing, learn the local rules, build a network of on-the-ground contacts, and always double-check “verified trade” data.
Next time you spot a stock trading at a P/E half of its US peer, pause and dig deeper. Sometimes it’s a bargain, sometimes it’s a value trap. Either way, it’s a wild ride—and that’s what makes global investing so much fun (and occasionally, so frustrating).