Deere & Co (DE, Financial) has recently seen a slight decline in stock performance with a daily loss of 3.11% and a 3-month loss of 3.38%. Despite these fluctuations, the company boasts a robust Earnings Per Share (EPS) (EPS) of 33.84. Investors are often on the lookout for opportunities where the market has undervalued a stock, and Deere's current situation poses the question: is the stock modestly undervalued? To shed light on this query, a valuation analysis is in order, and the following sections will delve into the financial details that determine Deere's true market value.
Company Introduction
Deere & Co, the world's leading manufacturer of agricultural equipment, is divided into four reportable segments, including production and precision agriculture, small agriculture and turf, construction and forestry, and John Deere Capital. With a vast dealer network, the company's global presence is strong, and its financial arm, John Deere Capital, ensures customer accessibility to its machinery. When comparing Deere's current stock price of $370.76 to the GF Value of $513.58, there appears to be a discrepancy, suggesting that the stock may be undervalued. The intrinsic valuation of Deere is critical to understanding its potential as an investment.
Summarize GF Value
The GF Value is a proprietary metric that indicates the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance, and future business prospects. If Deere's stock price significantly deviates from the GF Value Line, it could imply overvaluation or undervaluation, influencing future returns. With a market cap of $106.80 billion and a current price below the GF Value, Deere (DE, Financial) seems modestly undervalued, hinting at potentially higher long-term returns than its business growth alone would suggest.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid capital loss. Deere's cash-to-debt ratio of 0.12 ranks lower than most of its industry peers, earning a financial strength rating of 5 out of 10 from GuruFocus. This fair balance sheet assessment is vital for investors considering Deere's stock.
Profitability and Growth
Deere has maintained profitability for the past decade, with impressive revenue of $60.40 billion and an EPS of $33.84 over the last twelve months. The company's operating margin of 23.15% is a testament to its efficiency and stands out in its industry. With a profitability rank of 8 out of 10, Deere's financial health is robust.
Furthermore, growth is a pivotal factor in valuation. Deere's 3-year average annual revenue growth rate of 11.8% and EBITDA growth rate of 18.6% reflect its capacity to create shareholder value, outperforming a majority of its competitors.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) offers insight into Deere's value creation. With a ROIC of 14.16 and a WACC of 8.51, Deere is effectively generating cash flow and creating value for its shareholders, as evidenced by the historical comparison below.
Conclusion
In conclusion, Deere & Co (DE, Financial) presents itself as a modestly undervalued enterprise. Its fair financial condition, coupled with strong profitability and better-than-average industry growth, makes it a compelling option for investors. To delve deeper into Deere's financials, one can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
