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Should Value Investors Buy Agco (AGCO) Stock?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is Agco (AGCO). AGCO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A.

We also note that AGCO holds a PEG ratio of 1.03. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AGCO's PEG compares to its industry's average PEG of 1.42. Within the past year, AGCO's PEG has been as high as 1.36 and as low as 0.70, with a median of 0.88.

Investors should also recognize that AGCO has a P/B ratio of 1.84. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 3.33. Over the past 12 months, AGCO's P/B has been as high as 1.84 and as low as 1.33, with a median of 1.61.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. AGCO has a P/S ratio of 0.59. This compares to its industry's average P/S of 0.87.

These are only a few of the key metrics included in Agco's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, AGCO looks like an impressive value stock at the moment.


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