Reviewing AGCO (AGCO) and Alamo Group (ALG)

AGCO (NYSE: AGCO) and Alamo Group (NYSE:ALG) are both industrial products companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, institutional ownership, risk and valuation.

Insider and Institutional Ownership

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81.9% of AGCO shares are owned by institutional investors. Comparatively, 91.5% of Alamo Group shares are owned by institutional investors. 16.7% of AGCO shares are owned by insiders. Comparatively, 3.5% of Alamo Group shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations for AGCO and Alamo Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AGCO 2 10 3 0 2.07
Alamo Group 0 1 1 0 2.50

AGCO currently has a consensus target price of $72.86, suggesting a potential upside of 12.50%. Alamo Group has a consensus target price of $92.00, suggesting a potential downside of 19.57%. Given AGCO’s higher possible upside, research analysts plainly believe AGCO is more favorable than Alamo Group.

Volatility and Risk

AGCO has a beta of 0.83, indicating that its share price is 17% less volatile than the S&P 500. Comparatively, Alamo Group has a beta of 0.93, indicating that its share price is 7% less volatile than the S&P 500.

Dividends

AGCO pays an annual dividend of $0.60 per share and has a dividend yield of 0.9%. Alamo Group pays an annual dividend of $0.44 per share and has a dividend yield of 0.4%. AGCO pays out 19.9% of its earnings in the form of a dividend. Alamo Group pays out 9.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. AGCO has raised its dividend for 4 consecutive years and Alamo Group has raised its dividend for 3 consecutive years. AGCO is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares AGCO and Alamo Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AGCO 2.24% 8.04% 3.10%
Alamo Group 4.86% 12.49% 8.13%

Valuation & Earnings

This table compares AGCO and Alamo Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AGCO $8.31 billion 0.62 $186.40 million $3.02 21.44
Alamo Group $912.38 million 1.46 $44.31 million $4.63 24.70

AGCO has higher revenue and earnings than Alamo Group. AGCO is trading at a lower price-to-earnings ratio than Alamo Group, indicating that it is currently the more affordable of the two stocks.

Summary

Alamo Group beats AGCO on 10 of the 17 factors compared between the two stocks.

AGCO Company Profile

AGCO Corporation is a manufacturer and distributor of agricultural equipment and related replacement parts. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. The Company’s segments are North America, South America, Europe/Middle East, and Asia/Pacific/Africa. The Company’s products are marketed under various brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra. As of December 31, 2016, the Company distributed its products through over 3,000 independent dealers and distributors in more than 150 countries. In addition, the Company also provides retail and wholesale financing through its finance joint ventures with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank). The Company’s AGCO Power engines division produces diesel engines, gears and generating sets.

Alamo Group Company Profile

Alamo Group Inc. is engaged in the design and manufacture of agricultural equipment and infrastructure maintenance equipment for governmental and industrial use. The Company operates in Industrial, Agricultural and European segments. The Company’s products include tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, excavators, vacuum trucks, snow removal equipment, pothole patchers, zero turn radius mowers, agricultural implements and related aftermarket. As of December 31, 2016, the Company operated 24 plants in North America, Europe, Australia and Brazil. The Company sells its products through a network of independent dealers and distributors to Governmental end users, related independent contractors, as well as to the agricultural and commercial turf markets. It also offers replacement parts for each of its wholegoods lines. The Company’s products are sold through various marketing organizations, and dealer and distributor networks.

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