Time to Follow the Insiders in AGCO?
AGCO is a manufacturer of tractors and other farm machinery. You might recognize some of their brands like
Massey Ferguson, Challenger, Valtra, AGCO, Fella, Fendt and Dafeng.
Over the past three months, insiders have purchased about $3 million in shares. The most recent purchase was at $45 which is where the stock is currently trading at.
The shares have struggled due to the drought in the U.S. The bearish community has recognized that a poor harvest will mean that farmers will have less cash flow for "new toys." However, analysts are missing one key point — international sales. AGCO makes 70% of its money from other markets in Europe and South America. As grain prices have risen due to the U.S. drought, South American producers will have more cash flow which will translate into higher sales.
For the three months ended June 30, the company said it earned $204.9 million, or $2.08 per share. That's compared with $133.7 million, or $1.36 per share, in the year-ago quarter. Furthermore, the company is growing revenues at a 25% clip in constant dollar terms.
Going forward the company expects to earn $5.50 to $5.75 per share for 2012 which gives the stock a current P/E of 8 which is remarkable considering the company is growing at over 20% per year.