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Fondamental analysis

AGCO Corporation is an American agricultural machinery manufacturer headquartered in Duluth, Georgia, United States

2021 continues to be a year of strong growth for AGCO: very positive results are coming from both sales and margins.

The geographical areas where the company operates have experienced strong growth despite the outbreak of the pandemic and a generalized increase in prices.

To date, we believe the stock fluctuates at -25% below what we believe to be a fair value. EV / EBTIDA of Argo Corporation is in fact clearly inferior to its sector, Farming / Agriculture.

The stock is particularly popular among analysts: Goldman Sach recently confirmed bullish estimates for the stock. Analysts estimate maximums around $ 200.00, we prefer to take a more cautious approach and estimate a first target of $ 155.00 in the medium term

⚡️Growth factors:

  • The results for the second quarter exceeded all expectations: with a turnover increased by 43% year on year, the growth forecasts for the full year of 2021 have also being raised.

  • The demand for machinery continues to be very high in Eastern Europe combined with strong growth in South America and APAC.

  • Continued growth and expansion in the technology department: in September 2021, AGCO acquired Farm Robotics and Automation S.L. (Faromatics), a leading company in technology applied to breeding.

  • VanEck is expected to launch a new ETF "VanEck Future of Food II" soon: We believe AGCO Corporation will most likely be part of the ETF. This event could bring new capital flows from the passive sector.

📖 Financial indicators:

  • EPS 2021: $ 9.50 (vs $ 8.40-8.60)

  • EV / EBITDA: 8.86 vs 14.71 (farming / agriculture sector)

  • Net sales: $ 2,879m (+ 43% vs Q2 20)

North America + 19.3%

South America + 67.3%

EMEA + 22.6%

APAC + 51.2%

  • Operating margin 2021: + 200bps (vs 2020)

  • Short-Term Liabilities: AGCO's short-term assets ($ 4.7 billion) outweigh its short-term liabilities ($ 3.6 billion).

  • Long-Term Liabilities: AGCO's short-term assets ($ 4.7 billion) outweigh its long-term liabilities ($ 2.1 billion)

  • Debt level: AGCO's debt / equity ratio (49.9%) is considered high.

  • Debt coverage: AGCO's debt is well covered by operating cash flow (62.9%).

  • Interest coverage: AGCO's interest payments on its debt are well covered by EBIT (coverage 81.6 times).

  • Dividend: AGCO's dividend (0.63%) is also lower than the lowest 25% of dividend payers in the US market (1.35%).

Entry range $120.00 - $128.00

Target 1 $ 155.00

Target 2 $ 175.00

Stop loss $ 110.00

OTB Global Investments

24 September 2021

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