Are Investors Undervaluing Agco (AGCO) Right Now?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is Agco (AGCO). AGCO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 13.32 right now. For comparison, its industry sports an average P/E of 14.17. Over the last 12 months, AGCO's Forward P/E has been as high as 15.49 and as low as 10.99, with a median of 13.47.
AGCO is also sporting a PEG ratio of 0.99. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AGCO's PEG compares to its industry's average PEG of 1.71. Within the past year, AGCO's PEG has been as high as 1.15 and as low as 0.70, with a median of 0.94.
We should also highlight that AGCO has a P/B ratio of 1.77. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 3.04. AGCO's P/B has been as high as 1.98 and as low as 1.33, with a median of 1.69, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. AGCO has a P/S ratio of 0.61. This compares to its industry's average P/S of 0.93.
Value investors will likely look at more than just these metrics, but the above data helps show that Agco is likely undervalued currently. And when considering the strength of its earnings outlook, AGCO sticks out at as one of the market's strongest value stocks.
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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.