Deere & Company DE
Verdict: Sell. Fair value $344 against a price of $466 on 6 Jan 2026, 26% below the price.
In plain words
The case for: Wide competitive moat provides durability. Market leadership enables pricing power.
The case against: Revenue is projected to decline by 26% from a peak of $60.25B in 2023 to $44.66B in 2025. Net.... The OCF / Net Income ratio was significantly below 1.0 in 2022 (0.66) and 2023 (0.84). This....
Main risks
- Severe Cyclical Downturn & Margin Compression: Revenue has fallen 26% from its 2023 peak, and net margins have compressed from 16.9% to 11.3%, indicating high sensitivity to the industry cycle.
- Extremely Poor Capital Allocation: The estimated 3-year ROIIC is -36.5%, suggesting that recent capital investments have coincided with a significant decline in operating profit, a major red flag for value creation. Current ROIC at ~5.8% is also very weak.
- High and Potentially Risky Leverage: Debt/Equity of 2.48x and an estimated Net Debt/EBITDA of 8.6x are extremely high. While partly due to the financial services arm, this level of leverage magnifies risk significantly during a downturn.
- Revenue is projected to decline by 26% from a peak of $60.25B in 2023 to $44.66B in 2025. Net...
- The OCF / Net Income ratio was significantly below 1.0 in 2022 (0.66) and 2023 (0.84). This...
- Revenue is projected to decline by 26% from a peak of $60.25B in 2023 to $44.66B in 2025. Net Income is projected to decline by 51% from $10.17B to $5.03B over the same period, indicating significant cyclical pressure on the business.