Investors looking for stocks in the Manufacturing - Farm Equipment sector might want to consider either Agco (AGCO - Free Report) or Lindsay (LNN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Right now, Agco is sporting a Zacks Rank of #2 (Buy), while Lindsay has a Zacks Rank of #3 (Hold). 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 only part of the picture 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
AGCO currently has a forward P/E ratio of 16.45, while LNN has a forward P/E of 31.08. We also note that AGCO has a PEG ratio of 1.37. 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 1.73.
Another notable valuation metric for AGCO is its P/B ratio of 1.60. 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 3.87.
These metrics, and several others, help AGCO earn a Value grade of B, while LNN has been given a Value grade of C.
AGCO has seen stronger estimate revision activity and sports more attractive valuation metrics than LNN, so it seems like value investors will conclude that AGCO is the superior option right now.