Head-To-Head Analysis: Federal Signal Corporation (FSS) vs. AGCO Corporation (AGCO)

Federal Signal Corporation (NYSE: FSS) and AGCO Corporation (NYSE:AGCO) are both multi-sector conglomerates companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, valuation, institutional ownership, risk and dividends.

Volatility and Risk

Federal Signal Corporation has a beta of 1.32, indicating that its stock price is 32% more volatile than the S&P 500. Comparatively, AGCO Corporation has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500.

Earnings & Valuation

This table compares Federal Signal Corporation and AGCO Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Federal Signal Corporation $707.90 million 1.77 $43.80 million $0.73 28.66
AGCO Corporation $7.41 billion 0.76 $160.10 million $2.54 27.72

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

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Federal Signal Corporation and AGCO Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federal Signal Corporation 0 0 2 0 3.00
AGCO Corporation 3 9 3 0 2.00

Federal Signal Corporation currently has a consensus target price of $20.00, indicating a potential downside of 4.40%. AGCO Corporation has a consensus target price of $68.85, indicating a potential downside of 2.21%. Given AGCO Corporation’s higher probable upside, analysts plainly believe AGCO Corporation is more favorable than Federal Signal Corporation.

Dividends

Federal Signal Corporation pays an annual dividend of $0.28 per share and has a dividend yield of 1.3%. AGCO Corporation pays an annual dividend of $0.56 per share and has a dividend yield of 0.8%. Federal Signal Corporation pays out 38.4% of its earnings in the form of a dividend. AGCO Corporation pays out 22.0% 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. Federal Signal Corporation has increased its dividend for 3 consecutive years and AGCO Corporation has increased its dividend for 2 consecutive years. Federal Signal Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

84.4% of Federal Signal Corporation shares are owned by institutional investors. Comparatively, 82.0% of AGCO Corporation shares are owned by institutional investors. 4.2% of Federal Signal Corporation shares are owned by insiders. Comparatively, 16.6% of AGCO Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Federal Signal Corporation and AGCO Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Federal Signal Corporation 5.30% 11.39% 5.64%
AGCO Corporation 2.59% 7.50% 2.90%

Summary

Federal Signal Corporation beats AGCO Corporation on 10 of the 17 factors compared between the two stocks.

Federal Signal Corporation Company Profile

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.

AGCO Corporation 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.

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