Examining AGCO’s Valuation After Recent Moves in Precision Farming Technology

• Wondering if AGCO stock is a genuine value opportunity or just another name on your watchlist? You are not alone, with many investors looking for solid ground in a shifting market.
• AGCO's share price has had some interesting movements lately, rising 4.3% in the last week and 15.6% year-to-date, though it dipped 2.9% over the last month.
• Recent headlines about AGCO's partnerships in sustainable agriculture and investments in new precision farming technologies have sparked interest, as the company continues to evolve its strategy. These moves provide fresh context to the stock’s price swings, catching the attention of analysts and investors alike.
• When it comes to valuation, AGCO scores a 4 out of 6 on our value checks, suggesting there is more to uncover. Let’s dive into the numbers and see how AGCO stacks up using different valuation approaches. Be sure to stay tuned for an even smarter way to size up the opportunity at the end of the article.

Find out why AGCO's 5.2% return over the last year is lagging behind its peers.

Approach 1: AGCO Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model calculates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s value. This process gives investors an estimate of what the business may truly be worth based on its expected cash generation.

For AGCO, the current Free Cash Flow stands at $700.8 Million. Analyst forecasts only extend for the next five years, projecting modest growth as AGCO continues to invest in new technologies and markets. Looking further ahead, Simply Wall St extrapolates these trends and estimates that the 2035 Free Cash Flow could reach around $1.16 Billion.

All cash flows are discounted to present value using a two-stage Free Cash Flow to Equity model. The result is an estimated intrinsic value of $180.74 per share.

Currently, AGCO’s market price trades at a 41.6% discount to this DCF estimate. This suggests the stock may be significantly undervalued at today’s prices.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests AGCO is undervalued by 41.6%. Track this in your watchlist or portfolio, or discover 928 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for AGCO.

Approach 2: AGCO Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics for profitable companies like AGCO, as it directly relates a company’s share price to its earnings per share. A reasonable PE ratio accounts for not just current profits, but also the company’s anticipated growth and the risks facing future earnings.

AGCO is currently trading at a PE ratio of 21x. To put this in context, the average PE among AGCO’s industry peers is 18.5x, while the broader machinery industry's average sits higher at 24.8x. On the surface, AGCO's valuation appears roughly in line with sector norms, though slightly below the industry average and above peers.

Simply Wall St uses a proprietary “Fair Ratio” to assess valuation more accurately. Unlike simple comparisons with peers or industry averages, the Fair Ratio combines factors such as AGCO’s earnings growth, profit margins, market cap, risk profile, and its specific place in the industry. For AGCO, the Fair Ratio is calculated to be 25.4x. This suggests that, factoring in all these elements, AGCO’s current valuation is below what would be considered fair for its unique situation.

Because AGCO’s current PE stands at 21x, which is noticeably lower than its Fair Ratio of 25.4x, it suggests that the stock could be undervalued based on its earnings and growth potential.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your AGCO Narrative

Earlier we mentioned there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is an investment tool that lets you create the story behind the numbers. It connects your outlook for AGCO’s industry, management, and growth with the financial forecasts that matter most and leads all the way to your own estimate of fair value.

Narratives bridge the gap between company news and numbers by linking your personal perspective, such as your assumptions for AGCO’s future revenue, margins, or risks, with a financial model that updates in real time as new developments enter the market.

On Simply Wall St’s Community page, millions of investors use Narratives to track, share, and refine their thinking. What makes Narratives unique is how they empower you to analyze investment opportunities by easily comparing your Fair Value to the current share price, while seeing how your view relates to the rest of the community.

For instance, some AGCO analysts, focusing on innovation and aftermarket growth, see a fair value up to $145, while others, concerned about tariffs and inventory risks, set their fair value closer to $97. Your Narrative can capture whichever perspective you believe best fits the facts.

Do you think there's more to the story for AGCO? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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