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3 Reasons to Avoid AGCO and 1 Stock to Buy Instead

By: StockStory

April 22, 2025 at 05:01 AM EDT

AGCO Cover Image

Over the past six months, AGCO’s shares (currently trading at $80.94) have posted a disappointing 17.9% loss while the S&P 500 was down 11%. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Is there a buying opportunity in AGCO, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Even with the cheaper entry price, we don't have much confidence in AGCO. Here are three reasons why we avoid AGCO and a stock we'd rather own.

Why Do We Think AGCO Will Underperform?

With a history that features both organic growth and acquisitions, AGCO (NYSE: AGCO) designs, manufactures, and sells agricultural machinery and related technology.

1. Core Business Falling Behind as Demand Declines

In addition to reported revenue, organic revenue is a useful data point for analyzing Agricultural Machinery companies. This metric gives visibility into AGCO’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, AGCO’s organic revenue averaged 1.3% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests AGCO might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). AGCO Organic Revenue Growth

2. Shrinking Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Analyzing the trend in its profitability, AGCO’s operating margin decreased by 7.6 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. AGCO’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its operating margin for the trailing 12 months was negative 1%.

AGCO Trailing 12-Month Operating Margin (GAAP)

3. EPS Trending Down

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for AGCO, its EPS declined by 40.8% annually over the last five years while its revenue grew by 5.2%. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

AGCO doesn’t pass our quality test. After the recent drawdown, the stock trades at 19× forward price-to-earnings (or $80.94 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of AGCO

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.

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