Foreign stocks are underrated investments that could be an important addition to your portfolio. International companies can be a great tool for diversification, and they remove some risk from investment strategies that depend on the continued health of the U.S. economy. There's a whole world of strong businesses out there -- these are three of the best international stocks to consider.

1. ASML

ASML (ASML 1.57%) supplies manufacturing equipment to customers in the semiconductor industry. This Dutch company holds more than a 90% market share within the niche of lithography machines, which are essential in microchip fabrication. ASML's place in the supply chain means that it shares some of the long-term demand drivers with high-profile chipmakers like Nvidia, Intel, and AMD.

Lithography machinery working in the semiconductor fabrication process.

Image source: Getty Images.

The company enjoys a wide economic moat thanks to its market dominance, large scale, and intellectual property. This sustainable competitive advantage should be attractive for anyone looking for a semiconductor stock that's not one of the usual suspects in the industry.

ASML's revenue growth is susceptible to cyclicality and macroeconomic pressures, but the 10-year chart shows an encouragingly consistent trend up and to the right. That top-line expansion has translated to even faster growth for earnings and free cash flow, which indicates strong operational efficiency.

A consistently high return on invested capital (ROIC) also offers convincing evidence of ASML's competitive advantage and operational excellence. The company boasts an exceptionally clean balance sheet with a long-term-debt-to-equity ratio of 0.4 and plenty of liquidity, rounding out its impressive set of fundamental ratios.

ASML Free Cash Flow Chart

ASML Free Cash Flow data by YCharts

Investors should recognize some key risks associated with ASML. Foreign stocks are subject to currency risks -- the value of their revenues and profits can fluctuate relative to each other or to an investor's home currency, which could impact shareholder returns.

In addition, ASML specifically has high customer concentration in China and Taiwan, where much of the world's microchip fabrication occurs. This opens the door to disruptions from trade disputes or geopolitical conflicts. This risk is common for semiconductor stocks, but it's worth noting.

Finally, ASML's forward P/E ratio is just under 35, which might feel expensive to some value-oriented investors. That's especially true for a business in a cyclical industry that's expected to see its sales growth slow down a bit over the next year. The stock's 0.8% dividend yield isn't particularly exciting for income investors, either.

ASML certainly comes at a premium price, but the company's quality and prospects justify the valuation to many investors.

2. Roche

Roche (RHHBY -0.76%) is a Swiss pharmaceutical stock. It's the third-largest branded drugmaker in the world, in terms of sales. Its broad portfolio of products addresses a variety of disease categories, including various cancers, asthma, cardiovascular conditions, eye diseases, neurological illness, and infectious viral diseases. It also has a significant diagnostics business. That portfolio includes top-sellers Ocrevus, Hemlibra, Perjeta, Tecentriq, and Actemra.

The stock has struggled over the past few years thanks to poor growth and discouraging news on new drug development. Demand for COVID-19 treatments dropped steeply for Roche and its peers in 2022 and 2023, wiping out important revenue streams more quickly than anticipated. Roche also lost patent exclusivity on Actemra starting in 2023, which should deal a further blow to sales over the next year.

These factors hurt Roche's momentum with investors, causing its dividend yield to rise and its forward P/E ratio to fall to much cheaper levels.

RHHBY PE Ratio (Forward) Chart

RHHBY PE Ratio (Forward) data by YCharts

But this dip has created a buying opportunity for long-term investors who like value stocks. Roche has an interesting pipeline of new products in development that could yield strong results down the road. Cancer treatments and other candidates in clinical trials have caught analysts' attention, so there's reason to be optimistic about new products down the line.

In the meantime, the stock pays a hefty 3.5% dividend yield. Its forward P/E ratio is under 15, so its valuation offers a relatively low-risk opportunity to buy a massive global leader. Americans can invest in Roche buy purchasing American depository receipts (ADR), which are available through most brokerage platforms.

3. Atlassian

Atlassian (TEAM -1.29%) is headquartered in Australia, and it provides a suite of software products that help teams of workers to collaborate and stay organized. The company's well-known products include Jira, Confluent, Trello, Bamboo, Crucible, and Atlas.

Atlassian shares surged during the pandemic along with its industry peers that make productivity software focused on remote collaboration. The stock's valuation reached completely unsustainable levels in 2020, and it has since crashed back to a more reasonable level.

TEAM PS Ratio Chart

TEAM PS Ratio data by YCharts

While the stock has been volatile in recent years, the company's fundamental performance has been steady. Revenue and free cash flow continue to expand at an impressive rate -- Atlassian reported 21% sales growth last quarter, with more than $160 million in free cash flow.

TEAM Free Cash Flow Chart

TEAM Free Cash Flow data by YCharts

Atlassian's suite has become essential for teams across numerous industries all over the world. That creates an economic moat, which is important to ward off several viable competitors. Competition and market saturation might make it difficult to maintain this pace for years to come, but Atlassian has been one of the most reliable growth vehicles available.

If the company can meet its lofty long-term growth goals, its current expensive valuation will be justified.