Does Deere Still Offer Value After Its Precision Agriculture Tech Push And 88.5% Five Year Surge
- If you have been wondering whether Deere is still a buy after its long run, this breakdown will walk through whether the current price offers genuine value or just reflects a great story already priced in.
- The stock has cooled slightly in the short term, with shares down around 1.3% over the last week and 1.1% over the past month, but it is still up 10.7% year to date and 88.5% over 5 years. This makes timing and valuation especially important.
- Recent headlines have focused on Deere's continued push into precision agriculture technology and automation, as the company doubles down on software driven farming solutions to keep its competitive edge. At the same time, investors are weighing how cyclical demand for equipment and evolving farm economics might affect the sustainability of that strategy.
- Right now, Deere scores a 3/6 valuation check score, suggesting it looks undervalued on some measures but not all. This makes it a useful example to compare across multiple valuation approaches and, later in this article, to explore a more holistic way of thinking about what the stock is really worth.
Find out why Deere's 5.7% return over the last year is lagging behind its peers.
Approach 1: Deere Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a business is worth today by projecting the cash it can generate in the future and discounting those cash flows back to the present.
For Deere, the latest twelve month Free Cash Flow is about $3.6 Billion. Analysts expect this to grow meaningfully, with projections reaching roughly $12.4 Billion of Free Cash Flow by 2030. Beyond the next five years of analyst forecasts, Simply Wall St extrapolates further growth to build a 2 Stage Free Cash Flow to Equity model, capturing both a high growth period and a more mature phase.
On this basis, the DCF model arrives at an intrinsic value of about $628 per share. Compared with the current market price, this suggests Deere is trading at a 26.3% discount to its estimated fair value, which implies the cash flow outlook is stronger than the share price currently reflects.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Deere is undervalued by 26.3%. Track this in your watchlist or portfolio, or discover 900 more undervalued stocks based on cash flows.
Approach 2: Deere Price vs Earnings
For profitable, established businesses like Deere, the price to earnings ratio is a useful yardstick because it directly links the share price to the profits each share generates. Investors generally accept that companies with stronger growth prospects and lower perceived risk should trade on higher PE multiples, while slower growing or riskier firms deserve lower ones.
Deere currently trades on a PE of about 24.9x. That is roughly in line with the wider Machinery industry average of around 24.9x, but modestly above the peer group average of about 22.7x, suggesting investors already pay a small premium for Deere compared with similar companies.
Simply Wall St also calculates a proprietary Fair Ratio of 34.3x, which represents the PE you might expect once Deere’s earnings growth, profitability, industry positioning, market cap and risk profile are taken into account. This tailored Fair Ratio is more informative than a basic peer or industry comparison because it adjusts for company specific strengths and risks rather than assuming all Machinery stocks deserve the same rating. Since Deere’s current 24.9x multiple sits well below this 34.3x Fair Ratio, the shares appear attractively valued on an earnings basis.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Deere Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company translated into concrete numbers like future revenue, earnings, margins and a fair value estimate. A Narrative connects what you believe about Deere’s business, for example that Precision Ag subscriptions will power a sharp earnings recovery despite a cyclical downturn, to a set of financial forecasts and then to a Fair Value that you can easily compare with the current share price to decide whether to buy, hold or sell. On Simply Wall St, millions of investors use Narratives in the Community page, where they can quickly create, adjust and share these story linked valuations, and see them update dynamically when new information such as earnings or news arrives. For Deere, one bullish Narrative might assume earnings climb toward the high end of analyst expectations and support a Fair Value closer to the most optimistic price targets around $724, while a more cautious Narrative might lean toward the lower earnings band and a Fair Value nearer the most bearish target of about $460.
Do you think there's more to the story for Deere? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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