Critical Comparison: Komatsu (OTCMKTS:KMTUY) and AGCO (NYSE:AGCO)

AGCO (NYSE:AGCO) and Komatsu (OTCMKTS:KMTUY) are both industrials companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, valuation, analyst recommendations, dividends, institutional ownership, risk and earnings.

Profitability

This table compares AGCO and Komatsu’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AGCO	2.76%	9.66%	3.39%
Komatsu	8.92%	10.56%	5.94%

Insider and Institutional Ownership

78.8% of AGCO shares are owned by institutional investors. Comparatively, 0.2% of Komatsu shares are owned by institutional investors. 0.6% of AGCO shares are owned by insiders. Comparatively, 2.9% of Komatsu shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

AGCO has a beta of 1.12, meaning that its share price is 12% more volatile than the S&P 500. Comparatively, Komatsu has a beta of 1.09, meaning that its share price is 9% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for AGCO and Komatsu, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AGCO	2	7	5	0	2.21
Komatsu	0	1	0	2	3.33

AGCO currently has a consensus target price of $123.67, indicating a potential upside of 8.29%. Given AGCO’s higher probable upside, equities analysts plainly believe AGCO is more favorable than Komatsu.

Dividends

AGCO pays an annual dividend of $1.20 per share and has a dividend yield of 1.1%. Komatsu pays an annual dividend of $0.89 per share and has a dividend yield of 2.3%. AGCO pays out 30.8% of its earnings in the form of a dividend. Komatsu pays out 32.0% 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. AGCO has raised its dividend for 12 consecutive years.

Valuation and Earnings

This table compares AGCO and Komatsu”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AGCO	$10.08 billion	0.78	$726.50 million	$3.89	29.36
Komatsu	$27.45 billion	1.33	$2.48 billion	$2.78	14.09

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

Summary

Komatsu beats AGCO on 10 of the 18 factors compared between the two stocks.

About AGCO

AGCO Corporation designs, manufactures and distributes agricultural equipment and technology for farmers around the world. Its products include tractors, combines, hay and forage equipment, sprayers, seeding and tillage equipment, grain storage systems, and precision agriculture solutions. The company’s brands include Fendt, Massey Ferguson, Valtra, and PTx, its precision agriculture business. AGCO was formed in 1990 and is headquartered in Duluth, Georgia. AGCO serves agricultural markets globally through a network of dealers and other distribution partners.

About Komatsu

Komatsu Ltd. is a Japanese manufacturer of construction, mining, utility and forestry equipment. Its products include excavators, bulldozers, wheel loaders, motor graders and mining trucks, along with machinery and services for forestry operations. The company also provides equipment maintenance, parts and technology solutions, including systems that support fleet management and automated operations. Founded in 1921 and headquartered in Tokyo, Komatsu has expanded from its origins as a Japanese industrial manufacturer into a global equipment and services provider.