Investors interested in stocks from the Manufacturing - Farm Equipment sector have probably already heard of Agco (AGCO) and Lindsay (LNN). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Agco and Lindsay are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that AGCO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
AGCO currently has a forward P/E ratio of 7.85, while LNN has a forward P/E of 17.28. We also note that AGCO has a PEG ratio of 0.74. 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. LNN currently has a PEG ratio of 0.91.
Another notable valuation metric for AGCO is its P/B ratio of 2.08. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LNN has a P/B of 3.09.
Based on these metrics and many more, AGCO holds a Value grade of B, while LNN has a Value grade of C.
AGCO stands above LNN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AGCO is the superior value option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
