DE - AGCO May Be One Of The Cheapest (Special) Dividend Stocks On The Market

2024-03-13 15:14:33 ET

Summary

• The market is trading well above average valuations, with investors paying more than 20x earnings.
• Small-cap value is the only segment trading below its 20-year average valuation.
• AGCO Corporation offers tremendous value as a relatively small industrial player trying to penetrate the agriculture industry through its Fendt brand, aggressive R&D, and new partnerships.

Introduction

Is the market overvalued?

That's an interesting debate, and opinions may differ.

However, one thing is for sure, the market is not cheap. Looking at the data below, we see that the market is trading well above the 30-year average of key metrics, including the price/earnings ratio, the CAPE ratio, cash flow multiples, and others.

Whereas investors who bought between 2014 and 2023 paid roughly 17x earnings (ignoring outliers), investors who buy the market at current levels pay more than 20x earnings.

Generally speaking, the higher the valuation, the lower the returns for the next few years. This makes sense, as lofty valuations tend to keep investors at bay....

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