AGCO or DE: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Manufacturing - Farm Equipment sector might want to consider either Agco (AGCO) or Deere (DE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Agco has a Zacks Rank of #1 (Strong Buy), while Deere has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that AGCO likely has seen a stronger improvement to its earnings outlook than DE has recently. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

AGCO currently has a forward P/E ratio of 23.09, while DE has a forward P/E of 25.65. We also note that AGCO has a PEG ratio of 1.76. 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. DE currently has a PEG ratio of 3.06.

Another notable valuation metric for AGCO is its P/B ratio of 1.97. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DE has a P/B of 5.11.

These are just a few of the metrics contributing to AGCO's Value grade of B and DE's Value grade of D.

AGCO stands above DE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AGCO is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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