Is Now The Time To Put Deere (NYSE:DE) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Deere (NYSE:DE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Deere

Deere's Improving Profits

Deere has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Deere's EPS skyrocketed from US$23.38 to US$36.31, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 55%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that Deere's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Deere is growing revenues, and EBIT margins improved by 5.2 percentage points to 25%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Deere's future profits.

Are Deere Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First and foremost; there we saw no insiders sell Deere shares in the last year. But the really good news is that Independent Director Tamara Erwin spent US$250k buying stock, at an average price of around US$371. Big buys like that may signal an opportunity; actions speak louder than words.

The good news, alongside the insider buying, for Deere bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$153m. While that is a lot of skin in the game, we note this holding only totals to 0.1% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Does Deere Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Deere's strong EPS growth. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. These things considered, this is one stock worth watching. You still need to take note of risks, for example - Deere has 2 warning signs we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Deere, you'll probably love this curated collection of companies in the US that have witnessed growth alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.