Has the Recent Pullback in Deere Created a New Opportunity for Investors?

• Wondering if Deere at around $469 a share is still a smart buy or if the easy money has already been made? This breakdown is designed to help you figure out whether the current price really lines up with the company’s long term potential.
• The stock is up 12.2% year to date and 98.1% over the last 5 years. However, the recent 5.8% pullback over the past week and modest 1.6% gain over the last month suggest the market is still trying to decide how much growth and risk to price in.
• Deere has been in the spotlight for its continued investment in precision agriculture and automation, along with ongoing commentary around farm equipment demand and infrastructure spending. All of these factors shape expectations for its long term cash flows. At the same time, headlines about cyclical headwinds in agriculture and broader industrial names have kept some investors cautious, adding to the recent share price swings.
• On our checklist of 6 valuation tests, Deere scores a 3 out of 6, suggesting it looks undervalued on some metrics but not all. Next, we will walk through the key valuation approaches investors typically use for Deere and then finish with a more holistic way to judge whether the stock is genuinely good value.

Find out why Deere's 3.6% 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 company is worth by projecting its future cash flows and discounting them back to today, so investors can compare that value with the current share price.

For Deere, the latest twelve month Free Cash Flow is about $3.6 billion. Analysts see this rising meaningfully over the next few years, with projections and extrapolations pointing to annual Free Cash Flow of roughly $12.4 billion by 2030. Simply Wall St uses a 2 Stage Free Cash Flow to Equity model in $, combining analyst forecasts for the next several years with longer term estimates to capture Deere’s potential as precision agriculture and automation scale up.

When all those future cash flows are discounted back to today, the intrinsic value comes out at about $626 per share, compared with a current price around $469. That implies the stock is trading at roughly a 25.1% discount to its estimated fair value, suggesting the market is not fully pricing in Deere’s long term cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Deere is undervalued by 25.1%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Deere.

Approach 2: Deere Price vs Earnings

For profitable companies like Deere, the Price to Earnings (PE) ratio is a useful way to gauge value because it links what investors pay today to the earnings the business is already generating. Higher expected growth and lower perceived risk usually justify a higher PE, while slower growth or more uncertainty tend to pull a normal or fair PE down.

Deere currently trades on about 25.2x earnings, which is slightly above the Machinery industry average of roughly 24.2x and above its peer group average of around 22.6x. On the surface, that could make Deere look a bit expensive compared to similar names.

Simply Wall St’s Fair Ratio, however, goes a step further by estimating what PE Deere should trade on given its earnings growth outlook, profitability, industry, size and specific risks. For Deere, that Fair Ratio is about 34.2x, well above both the industry and peer averages. Because this framework adjusts for Deere’s strengths and risk profile, it offers a more tailored benchmark than a simple peer comparison and suggests the current 25.2x multiple leaves room for upside.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

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, a simple way to connect your view of Deere’s story with concrete forecasts for revenue, earnings and margins, and then see what that implies for fair value. A Narrative on Simply Wall St is your own investment storyline, where you spell out why you think Deere will win or struggle, translate that into financial assumptions, and get a clear fair value that you can compare with today’s share price to inform your decision to buy, hold or sell. Narratives live inside the Community page on Simply Wall St’s platform, are used by millions of investors, and update dynamically as new news, earnings or guidance are released. This way, your fair value view evolves with the facts instead of going stale. For example, one Deere Narrative might lean into rapid precision agriculture adoption and a fair value near the bullish analyst target of about $724. A more cautious Narrative could focus on tariffs and cyclical risks and land closer to the low end of around $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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