AGCO (NYSE: AGCO) and Federal Signal (NYSE:FSS) are both industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, dividends, valuation, profitability, institutional ownership, earnings and analyst recommendations.
Risk and Volatility
AGCO has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500. Comparatively, Federal Signal has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500.
This is a breakdown of current ratings and target prices for AGCO and Federal Signal, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
AGCO currently has a consensus price target of $70.36, suggesting a potential downside of 1.97%. Federal Signal has a consensus price target of $20.00, suggesting a potential downside of 1.96%. Given Federal Signal’s stronger consensus rating and higher possible upside, analysts clearly believe Federal Signal is more favorable than AGCO.
Earnings and Valuation
This table compares AGCO and Federal Signal’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|AGCO||$7.41 billion||0.77||$160.10 million||$2.54||28.26|
|Federal Signal||$707.90 million||1.73||$43.80 million||$0.73||27.95|
AGCO has higher revenue and earnings than Federal Signal. Federal Signal is trading at a lower price-to-earnings ratio than AGCO, indicating that it is currently the more affordable of the two stocks.
This table compares AGCO and Federal Signal’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
AGCO pays an annual dividend of $0.56 per share and has a dividend yield of 0.8%. Federal Signal pays an annual dividend of $0.28 per share and has a dividend yield of 1.4%. AGCO pays out 22.0% of its earnings in the form of a dividend. Federal Signal pays out 38.4% 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 3 consecutive years and Federal Signal has raised its dividend for 2 consecutive years.
Institutional and Insider Ownership
82.6% of AGCO shares are owned by institutional investors. Comparatively, 84.1% of Federal Signal shares are owned by institutional investors. 16.6% of AGCO shares are owned by company insiders. Comparatively, 4.2% of Federal Signal shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.
Federal Signal beats AGCO on 10 of the 17 factors compared between the two stocks.
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.
About Federal Signal
Federal Signal Corporation designs, manufactures and supplies a suite of products and integrated solutions for municipal, governmental, industrial and commercial customers. The Company’s segments include the Environmental Solutions Group and the Safety and Security Systems Group. Its Environmental Solutions Group manufactures and supplies a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks and waterblasting equipment. The products are sold to both municipal and industrial customers under the Elgin, Vactor, Guzzler and Jetstream brand names. Safety and Security Systems is a manufacturer and supplier of systems and products that law enforcement, fire rescue, emergency medical services, campuses military facilities and industrial sites use to protect people and property. It offers systems for campus and community alerting, emergency vehicles, first responder interoperable communications and industrial communications, among others.
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