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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 12.43, which compares to its industry’s average of 15.39. Over the past year, AGCO’s Forward P/E has been as high as 20.46 and as low as 11.93, with a median of 15.91.
We also note that AGCO holds a PEG ratio of 0.64. 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. AGCO’s industry has an average PEG of 0.75 right now. Within the past year, AGCO’s PEG has been as high as 2.07 and as low as 0.61, with a median of 1.02.
Investors should also recognize that AGCO has a P/B ratio of 3.05. Investors use the P/B ratio to look at a stock’s market value versus 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 5.44. Over the past 12 months, AGCO’s P/B has been as high as 3.77 and as low as 1.93, with a median of 3.04.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. 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 0.88. This compares to its industry’s average P/S of 1.33.
Finally, our model also underscores that AGCO has a P/CF ratio of 9.65. This metric takes into account a company’s operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. AGCO’s current P/CF looks attractive when compared to its industry’s average P/CF of 14.90. AGCO’s P/CF has been as high as 15.56 and as low as 8.29, with a median of 11.45, all within the past year.
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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