Is Now The Time To Look At Buying Deere & Company (NYSE:DE)?

By
Simply Wall St
Published
May 10, 2022
NYSE:DE
Source: Shutterstock

Let's talk about the popular Deere & Company (NYSE:DE). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$438 at one point, and dropping to the lows of US$338. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Deere's current trading price of US$365 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Deere’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Deere

What's the opportunity in Deere?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.3% below my intrinsic value, which means if you buy Deere today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $369.28, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Deere’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Deere generate?

earnings-and-revenue-growth
NYSE:DE Earnings and Revenue Growth May 10th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Deere's earnings over the next few years are expected to increase by 40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in DE’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on DE, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Deere, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Deere (of which 1 is concerning!) you should know about.

If you are no longer interested in Deere, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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