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Should Value Investors Buy Agco (AGCO) Stock?

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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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 to watch right now is Agco (AGCO - Free Report) . 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 13.93, which compares to its industry's average of 15.02. Over the past 52 weeks, AGCO's Forward P/E has been as high as 15.49 and as low as 10.99, with a median of 13.57.

We also note that AGCO holds a PEG ratio of 1. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AGCO's industry currently sports an average PEG of 1.79. Over the past 52 weeks, AGCO's PEG has been as high as 1.15 and as low as 0.70, with a median of 0.96.

Investors should also recognize that AGCO has a P/B ratio of 1.85. The P/B ratio pits a stock's market value against 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 3.22. AGCO's P/B has been as high as 1.98 and as low as 1.33, with a median of 1.71, 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 0.63. This compares to its industry's average P/S of 0.97.

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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