This Stock Looks Like a Value Buy Now

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Agriculture players have been riding high. They are making it big despite the overall sense of economic gloom.

How could CNH Global (NYS: CNH) then not do well when demand for farm equipment is rising globally? The farm and construction equipment maker upgraded its full-year margins outlook after reporting a robust second quarter. This has encouraged me to take a better look at the company and help Fools decide whether the stock looks like a valuable pick now.

Operational performance
Demand for farm equipment has increased tremendously with soaring crop prices and higher farming activity. Moreover, markets such as Asia and Latin America are also driving demand for construction equipment. These factors have boosted CNH's revenue by 18.6% over the past year. Compare this with a five-year rate of 5.9%, and the acceleration is impressive.

What's astounding is the bottom-line growth the company clocked last year. From a five-year rate of 27.8%, CNH's net income has grown at a whopping rate of 368.7% in the past 12 months. Whew!

Growth and stability
CNH launched several new products in both the agricultural and construction equipment segments last year. The company has also been expanding production capacities.

CNH has been increasing its presence in emerging markets. Early this year, CNH invested in an India-based company to set up a stronger construction equipment manufacturing base in the country. It has also planned to set up a manufacturing site in Argentina to cater to the Latin America market.

The company has extended its alliance with GPS technology player TrimbleNavigation (NAS: TRMB) for more advanced agriculture solutions and innovative products.

However, such investments and expansion moves have taken CNH's debt-to-equity ratio to a very high level of 203%, which could be a concern. Cash equivalents stand at $949 million, though the company has around $3.4 billion worth of liquid short-term investments. Interest coverage of 2.2 times and an unlevered free cash flow balance of $1.3 billion as of June 30 provide some comfort. The company is also not paying dividends, which saves some cash.

Value insights
But is CNH cheap when valued next to its peers? Let's take a look:

CNH Global12.17.70.390.82
Deere (NYS: DE) 11.79.60.943.74
Caterpillar (NYS: CAT) 14.09.80.943.64
AGCO (NYS: AGCO) 10.78.50.421.12
Terex (NYS: TEX) NM9.30.230.55

Source: Capital IQ, a division of Standard & Poor's.

CNH seems fairly priced on a trailing P/E basis. But with earnings expected to grow, its forward P/E drops off dramatically. This future potential has not been factored in the stock price, indicating a possible upside for CNH.

Moreover, currently the stock is trading at just 0.39 time its sales, and 0.82 time its book value. It's certainly looking like a value pick right now.

The Foolish bottom line
CNH's bottom-line growth has been superb, and its investments in expansion and product additions are impressive, too. The company might not be paying dividends, but with such cheap valuations, and the stock trading close to its 52-week low, CNH could provide nice returns. Keep an eye on this stock, Fools.

Click here to add CNH to your stock watchlist.

At the time this article was published Neha Chamaria does not own shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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