Investors looking for stocks in the Manufacturing - Farm Equipment sector might want to consider either Agco (AGCO) or Lindsay (LNN). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Agco has a Zacks Rank of #1 (Strong Buy), while Lindsay has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AGCO is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
AGCO currently has a forward P/E ratio of 8.48, while LNN has a forward P/E of 18.60. We also note that AGCO has a PEG ratio of 0.80. 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 0.98.
Another notable valuation metric for AGCO is its P/B ratio of 2.23. 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. By comparison, LNN has a P/B of 3.32.
These metrics, and several others, help AGCO earn a Value grade of B, while LNN has been given 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report