Is Deere Share Price Growth Justified After New Smart Farming Investments?

• Wondering if Deere is a bargain or overpriced? Here is what you need to know before making your next move.
• The share price has notched up a 2.3% gain this week and is up 16.5% year-to-date. Investors are watching closely for signs of sustained growth or fresh risks.
• Recent headlines have highlighted Deere's continued investment in smart farming technology and strategic expansions, fueling speculation about longer-term prospects. These moves are shaping the narrative around Deere's market position and may help explain recent market interest.
• If you look at our valuation checks, Deere scores a 3 out of 6 for being undervalued. We will explore exactly what that means across different approaches and, at the end, introduce a perspective that might reveal an even clearer picture of Deere's true worth.

Deere delivered 10.6% returns over the last year. See how this stacks up to the rest of the Machinery industry.

Approach 1: Deere Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's true value by projecting its future cash flows and discounting them back to today's value. This approach is widely used because it attempts to capture the intrinsic worth of a business by focusing on the cash it is expected to generate.

For Deere, the most recent reported Free Cash Flow stands at approximately $4.83 billion. Analyst estimates project continued growth in the company's annual cash flows, and by 2029, Deere's Free Cash Flow is forecasted to reach $12.04 billion, according to the data. Notably, cash flow projections beyond 2029 are extrapolated rather than based directly on analyst consensus, providing a forward-looking perspective on Deere's potential.

Based on these projections, the two-stage Free Cash Flow to Equity model used here calculates a fair value of $851.41 per share for Deere. At current prices, this suggests the stock is trading at a substantial 42.8% discount to its estimated intrinsic value. This means the market may be underestimating Deere's long-term earning potential and growth prospects.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Deere is undervalued by 42.8%. Track this in your watchlist or portfolio, or discover 926 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 (PE)

For established, profitable companies like Deere, the Price-to-Earnings (PE) ratio is a widely used valuation tool. It illustrates how much investors are willing to pay per dollar of earnings, providing a quick snapshot of the market's expectations for a company’s future growth and risk profile. Companies expected to grow faster or with lower perceived risk often command higher PE ratios. Slower-growing or riskier firms tend to see lower multiples.

Deere’s current PE ratio stands at 25x. This is modestly above the Machinery industry average of 23.7x and higher than the average of its listed peers, which sits at 22.7x. While these benchmarks are useful for context, they do not capture Deere’s unique growth prospects, risk profile, or profitability.

This is where Simply Wall St’s “Fair Ratio” comes in. The Fair Ratio is a proprietary metric that considers not just industry trends and peer comparisons, but also Deere’s earnings growth outlook, profit margins, company size, and business risks. Because it balances these key factors, the Fair Ratio provides a more nuanced assessment of where Deere’s PE should land compared to simple averages.

With a Fair Ratio of 33.6x compared to Deere’s actual 25x PE, the stock appears undervalued based on this holistic view. This sizable gap suggests the market may not be fully appreciating Deere’s favorable position and prospects.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Deere Narrative

Earlier we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives, a practical tool that lets you anchor your investment decisions in your own story of Deere, beyond just the numbers.

A Narrative is an investor’s perspective on a company’s future, where you tell the story behind your forecast: how you see Deere’s potential for revenue, earnings, and profit margins, and what you believe its fair value should be. Narratives link this story directly to a financial forecast and a fair value estimate, connecting what you know or believe about Deere’s business to a clear action plan.

Narratives are available right now within Simply Wall St’s Community page, where millions of investors use them to create, share, and compare viewpoints. They allow you to easily see how your fair value stacks up against the current market price, helping you decide when Deere looks like a buy or a sell. They update automatically if the company’s news or earnings change.

For example, looking at Deere, some investors see surging technology adoption and margin gains, estimating a bullish fair value of $724 per share, while others are more cautious, concerned about sustained industry headwinds and assign a fair value closer to $460 per share.

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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