Valued at a market cap of $181 million, Ag Growth International (TSX: AFN) has grossly underperformed the broader markets over the past year.
Founded in 1996, Ag Growth International provides equipment solutions for bulk agricultural commodities in Canada, the United States, and internationally.
However, this fall, this Canadian company is having a much rougher harvest than its customers. The TSX stock currently trades at $9.61, down 74% from its 52-week high.
So is the pullback a rare chance to buy an undervalued Canadian stock at a deep discount? Or is the market waving a red flag? Let’s dig into the story.
How AGI became one of the best-known TSX stocks in farm equipment
Ag Growth International, better known as AGI, builds equipment that stores, moves, and processes food.
AGI runs two businesses.
- Its farm segment sells equipment to growers through a dealer network.
- Its commercial segment builds large facilities for grain handlers and food processors.
For years, this combination worked well.
To fund growth, AGI took on more debt. In Brazil, it went a step further. Along with supplying equipment for large turnkey projects, it also helped customers finance them.
That tied up a lot of cash. Then farm demand cooled, and the strain on AGI’s finances began to show.
By December 2025, AGI was filing status reports under a management cease trade order. In January, its CEO stepped down, and Paul Brisebois was named interim chief executive.
The latest blow landed on Sept. 23. AGI said it will ask holders of its 5.25% debentures due Dec. 31, 2026, to approve changes to the terms at an Oct. 28 meeting. The issue totals $85 million, AGI said on its Q2 earnings call. Basically, a big payment comes due in about three months, and AGI wants to rewrite the deal.
TD Cowen analyst Michael Tupholme cut the rating on AGI stock to “hold” from “buy,” saying the risk and cost of managing its upcoming maturities had climbed sharply since early August. He lowered his AFN stock price target to $11 from $23.
Two more debentures mature in 2027.
AGI ended Q2 with a leverage ratio of 5.2 times, which is elevated for a cyclical business. Put simply, its debt is more than five times its yearly adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
In Q2, the farm business reported revenue of $140 million, up 10% year over year. Adjusted EBITDA in this segment rose by 12% to $33 million. North American orders for portable equipment jumped 77% from a year ago.
Revenue in the commercial business fell 17% to $183 million, while margin shrank by 600 basis points to 10.6%. Wars in Ukraine and Iran, a weak rice market in India and delayed projects in North America weighed heavily on this segment.
Brisebois summed up the fix in one line on the earnings call: “What we need is volume improvement to improve our margin profile.”
AGI is targeting more than $30 million in yearly cost savings. It cut its executive team from 17 people to seven, collected about $106 million from Brazilian receivables and expects over $20 million from asset sales in the second half.
A board committee is also reviewing strategic options.
Is AGI one of the top Canadian stocks to buy on the dip?
On paper, the stock looks dirt cheap. AGI’s market value is about $181 million, against trailing revenue of $1.39 billion. The average analyst target is $20.57, indicating an upside potential of over 100%.
Management agrees. “We believe the intrinsic value of AGI is not reflected in our current valuation,” Brisebois said on the call.
AGI lost about $117 million over the last 12 months. And when a company renegotiates debt, shareholders stand last in line.
When AGI issued this debenture, it kept the option to repay the principal by issuing common shares, which will dilute existing shareholder wealth.
For most investors, the smarter path is a portfolio of top TSX stocks with strong balance sheets, steady cash flow, and room to grow.
