Deere & Company (DE)

Conclusion

Deere & Company manufactures agricultural and construction equipment worldwide and runs a financial services arm that supports its sales. At 691.28 USD on 9 November 2026, the market capitalisation is 186.4 billion USD.

The verdict is overvalued. The P/E of 38.2 compares with a ten-year median of 19.3, a premium of 97.9%, and EV/EBITDA of 20.5 compares with a median of 14.2, a premium of 45.0%. The DCF gives 238.76 USD per share at a discount rate of 9.35%. The fair value band runs from 253.30 to 379.95 USD with a midpoint of 316.62 USD, giving a margin of safety of -54.2%. The reverse DCF implies growth of 18.76% a year, against revenue growth of 5.17% and free cash flow per share growth of -4.85% over five years.

What supports the case is the operating margin of 19.0%, against a ten-year median of 15.1%, and a share count that fell at a rate of 3.01% a year over five years. Earnings beat expectations in seven of the last eight quarters. What weakens it is net debt of 4.61 times EBITDA, a current ratio of 0.77, and free cash flow conversion of 50.4% over five years. ROIC of 9.12% is only slightly above the WACC of 7.95%.

Financial health

Financial strength is red, held back by the net debt to EBITDA of 4.61 and the current ratio of 0.77, both assessed as bad. The quick ratio is 0.56, the debt to equity ratio is 2.29, and interest coverage is 3.22, which is neutral. The Altman Z-score is 2.85, in the grey zone. The Altman model was designed for manufacturers, and Deere is a manufacturer, so its reading applies directly, though the grey zone means it gives no clear signal. Insolvency risk: low, about 0.6% by the estimate of the Ohlson model over one to two years. The figures are based on the 31 October 2025 balance sheet. Deere's leverage is high mainly because its financial services arm is funded with debt, which the net debt figure captures but does not separate from the industrial business.

Earnings quality

Earnings quality is yellow. Positives are the Beneish M-score of -2.54, which is read as unlikely to indicate manipulation, the share count reduction of 3.01% a year over five years, and the beat record of seven out of eight quarters, with an average surprise of 9.2%. Negatives are free cash flow conversion of 50.4% over five years, below the 79.4% reported on a trailing basis, and the Piotroski score of 5 out of 9. The accrual ratio is -0.02, which means cash earnings are slightly above reported earnings. Stock-based compensation is 0.34% of revenue, and free cash flow after it is 3.70 billion USD. Analysts' estimates for next year have risen slightly over 90 days, with 3 upward revisions and 1 downward revision in the last 30 days, while the current year estimate is almost unchanged.

Profitability

Profitability is green. The gross margin of 35.7% compares with a ten-year median of 31.0%, the operating margin of 19.0% with 15.1%, and the net margin of 10.2% with 9.9%. Return on invested capital is 9.12% against a WACC of 7.95%, a difference of 1.17%, rated neutral. ROIC was 12.16% at the five-year median, so the spread has narrowed. Return on equity is 17.4%, but the DuPont split shows that much of it comes from leverage: a net margin of 11.25%, an asset turnover of 0.42 and an equity multiplier of 4.08. The equity multiplier inflates the return, so the business return on capital is the more reliable measure of quality.

Growth

Growth is green, held up by five-year EPS growth of 16.3% a year and next year's EPS growth estimate of 26.7%. Revenue is neutral: it fell 4.5% a year over three years, but grew 5.2% a year over five years and 4.7% over ten. Revenue grew in six of the ten comparable years. Three-year EPS growth is negative at -7.4% a year, while ten-year EPS growth is 12.4% a year. Free cash flow per share grew 58.7% a year over three years but fell 4.9% a year over five, so the recent three-year improvement follows a weaker period. Growth is solid over the long run, but recent revenue has not kept pace with the earnings expectations built into the price.

Valuation

Valuation is red, with the verdict overvalued and a margin of safety of -54.2%. The P/E of 38.2 is 97.9% above its ten-year median of 19.3, EV/EBITDA of 20.5 is 45.0% above 14.2, price to free cash flow of 48.2 is 75.2% above 27.5, and price to sales of 3.9 is 82.2% above 2.1. The DCF gives 238.76 USD per share at a discount rate of 9.35%, with growth of 5.2% in the first stage and 2.5% in the terminal stage. The fair value from historical multiples is 394.49 USD. The fair value band of 253.30 to 379.95 USD with a midpoint of 316.62 USD is built on fixed assumptions, including a 5% equity risk premium and capped growth. It is an order of magnitude, not a price target. The dividend yield is 0.94%, with a payout of 45.4% of free cash flow.

Risks

The main risk is leverage. Net debt of 4.61 times EBITDA and a current ratio of 0.77 leave little room if earnings or credit conditions weaken, and interest coverage of 3.22 would fall further if borrowing costs rose. Weak free cash flow conversion over five years means reported profits have not always turned into cash. A return on capital only 1.17 points above the cost of capital, measured by ROIC minus WACC, leaves little margin for error. The price already implies growth of 18.76% a year, far above the 5.17% revenue growth achieved over five years. The model values are not available for some inputs, and this analysis has no debt maturity schedule and no revenue split by segment, so the debt risk of the financial services arm cannot be separated from the core business.