DEERE & CO (DE) Stock Analysis
DEERE & CO (DE) Stock Analysis
Overall Grade: F (Concerning)
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DEERE & CO faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 5.6% | Below expectations |
| FCF Margin | 13.8% | Healthy cash flow |
| Debt/Equity | 2.1x | Elevated debt |
Investment Thesis: Healthy free cash flow margin of 13.8% provides financial flexibility for growth and shareholder returns.
What is DEERE & CO's Profitability and ROIC?
DEERE & CO's return on invested capital of 5.6% is below the typical cost of capital.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 5.6% | Warning | Below cost of capital |
| Return on Equity (ROE) | 19.3% | Good | Efficient use of shareholder equity |
| Operating Margin | 12.8% | Good | Moderate operational efficiency |
How Strong is DEERE & CO's Cash Flow Quality?
DEERE & CO generated $6.4B in free cash flow over the trailing twelve months, representing a 13.8% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 1.6x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 13.8% | Good | Healthy cash generation |
| Free Cash Flow (TTM) | $6.4B | Good | Positive cash generation |
| OCF/Net Income | 1.6x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is DEERE & CO's Financial Health?
DEERE & CO's debt-to-equity ratio of 2.1x indicates elevated leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 2.1x | Warning | Elevated leverage |
| Net Cash Position | $-49.0B | Warning | Net debt position |
Is DEERE & CO Stock Overvalued or Undervalued?
DEERE & CO trades at a P/E of 29.7x, representing a premium to the sector median of N/A. Free cash flow yield of 4.5% reflects market expectations for growth.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 29.7x | Adequate | Premium valuation |
| EV/Sales | 4.1x | Good | Growth premium priced in |
| FCF Yield | 4.5% | Good | Lower cash yield |
| Dividend Yield | 1.2% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 5.6% | Bottom 50% | 0.7x below |
| Free Cash Flow Margin | 13.8% | Top 25% | 2.6x above |
| Operating Margin | 12.8% | Top 50% | 1.6x above |
| Return on Equity (ROE) | 19.3% | Top 25% | 2.2x above |
| P/E Ratio | 29.7x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 5.6% (Warning - Bottom 50% of sector (median: 8.0%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 13.8% (Good - Top 25% of sector (median: 5.4%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 213.4% (Warning)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 29.7x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 4.5% (Adequate)
Frequently Asked Questions
Q: What is DEERE & CO's Return on Invested Capital (ROIC)?
DEERE & CO (DE) has a trailing twelve-month Return on Invested Capital (ROIC) of 5.6%. This compares below the sector median of 8.0%. An ROIC below 8% suggests the company may be destroying shareholder value.
Q: What is DEERE & CO's Free Cash Flow Margin?
DEERE & CO (DE) has a free cash flow margin of 13.8%, generating $6.4 billion in free cash flow over the trailing twelve months. A FCF margin between 10-20% represents healthy cash generation for most industries.
Q: Is DEERE & CO stock overvalued or undervalued?
DEERE & CO (DE) trades at a P/E ratio of 29.7x, which is above the sector median of N/A. The EV/Sales multiple is 4.1x. Free cash flow yield is 4.5%, which is in line with market averages.
Q: Does DEERE & CO pay a dividend?
DEERE & CO (DE) currently pays a dividend yield of 1.2%. Including share buybacks, the total shareholder yield is 1.9%. The relatively low yield suggests the company prioritizes growth reinvestment over income distribution.
Q: How much debt does DEERE & CO have?
DEERE & CO (DE) has a debt-to-equity ratio of 2.1x with total debt of $56.1 billion. Net debt position is $49.0 billion.
Q: What is DEERE & CO's revenue and earnings growth?
DEERE & CO (DE) declined revenue by 2.6% year-over-year. Earnings per share decreased by 21.5% compared to the prior year. Revenue decline may indicate market challenges or industry headwinds.
Q: Is DEERE & CO buying back stock?
DEERE & CO (DE) repurchased $999.0 million of stock over the trailing twelve months. This represents a buyback yield of 0.7%.
Q: How does DEERE & CO compare to competitors in Industrials?
Compared to other companies in Industrials, DEERE & CO (DE) shows: ROIC of 5.6% is below the sector median of 8.0% (Bottom 40%). FCF margin of 13.8% exceeds the sector median of 5.4% (Top 19% of sector). These rankings are based on MetricDuck's analysis of all Industrials companies with available SEC filings.
Q: What warning signs should I watch for with DEERE & CO?
Investors in DEERE & CO (DE) should monitor these potential warning signs: 1) ROIC has been declining, potentially signaling deteriorating competitive position. 2) Debt-to-equity of 2.1x is elevated. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-K filed 2025-12-18. TTM metrics as of Q1 2026.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.