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Should Value Investors Buy Agco (AGCO) Stock?

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Zacks Equity Research
·2 min read
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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is Agco (AGCO). AGCO is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 18.76 right now. For comparison, its industry sports an average P/E of 23.35. Over the past year, AGCO's Forward P/E has been as high as 22.35 and as low as 8.25, with a median of 16.92.

We also note that AGCO holds a PEG ratio of 1.27. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AGCO's industry currently sports an average PEG of 3.61. Within the past year, AGCO's PEG has been as high as 6.06 and as low as 0.92, with a median of 1.88.

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 1.17. This compares to its industry's average P/S of 1.57.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Agco is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AGCO feels like a great value stock at the moment.


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Zacks Investment Research