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
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