Investors interested in Manufacturing - Farm Equipment stocks are likely familiar with Agco (AGCO) and Deere (DE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Agco has a Zacks Rank of #1 (Strong Buy), while Deere has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AGCO has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
AGCO currently has a forward P/E ratio of 22.31, while DE has a forward P/E of 25.60. We also note that AGCO has a PEG ratio of 1.71. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DE currently has a PEG ratio of 3.06.
Another notable valuation metric for AGCO is its P/B ratio of 1.91. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DE has a P/B of 5.12.
Based on these metrics and many more, AGCO holds a Value grade of B, while DE has a Value grade of D.
AGCO sticks out from DE in both our Zacks Rank and Style Scores models, so value investors will likely feel that AGCO is the better option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
