Deere & Company logged a -1.5% change during today's evening session, and is now trading at a price of $423.94 per share.
Deere & Company returned gains of 25.0% last year, with its stock price reaching a high of $450.0 and a low of $328.62. Over the same period, the stock outperformed the S&P 500 index by 15.0%. More recently, the company's 50-day average price was $401.35. Deere & Company manufactures and distributes various equipment worldwide. Based in Moline, IL, the large-cap Industrials company has 82,200 full time employees. Deere & Company has offered a 1.1% dividend yield over the last 12 months.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2019-12-19 | 2020-12-17 | 2021-12-16 | 2022-12-15 | |
|---|---|---|---|---|
| Revenue (MM) | $39,258 | $35,540 | $44,024 | $52,577 |
| Gross Margins | 31.8% | 33.4% | 33.9% | 32.8% |
| Operating Margins | 14.2% | 14.4% | 19.5% | 19.4% |
| Net Margins | 8.29% | 7.74% | 13.54% | 13.56% |
| Net Income (MM) | $3,253 | $2,751 | $5,963 | $7,131 |
| Net Interest Expense (MM) | -$1,466 | -$1,247 | -$993 | -$1,062 |
| Depreciation & Amort. (MM) | -$2,019 | -$2,118 | -$2,050 | -$1,895 |
| Earnings Per Share | $10.15 | $8.69 | $19.14 | $29.74 |
| EPS Growth | n/a | -14.38% | 120.25% | 55.38% |
| Diluted Shares (MM) | 321 | 317 | 312 | 293 |
| Free Cash Flow (MM) | $2,884 | $6,520 | $6,480 | $3,740 |
| Capital Expenditures (MM) | $528 | $963 | $1,246 | $959 |
| Net Current Assets (MM) | -$10,826 | -$9,566 | -$5,723 | -$4,198 |
| Current Ratio | 1.62 | 2.19 | 2.15 | 1.98 |
| Long Term Debt (MM) | $30,229 | $32,734 | $32,888 | $33,596 |
| Net Debt / EBITDA | 7.05 | 7.73 | 5.5 | 5.83 |
Deere & Company has strong margins with a positive growth rate and exceptional EPS growth. Additionally, the company's financial statements display growing revenues and decreasing reinvestment in the business and consistent free cash flow. However, the firm suffers from slimmer gross margins than its peers and a highly leveraged balance sheet. Finally, we note that Deere & Company has a decent current ratio.
A Very Low P/E Ratio but Trades Above Its Graham Number:
Deere & Company has a trailing twelve month P/E ratio of 13.5, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of $32.08, the company has a forward P/E ratio of 12.5. According to the 25.9% compound average growth rate of Deere & Company's historical and projected earnings per share, the company's PEG ratio is 0.52. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 10.6%. On this basis, the company's PEG ratio is 1.27. This implies that the shares are fairly valued. In contrast, Deere & Company is likely overvalued compared to the book value of its equity, since its P/B ratio of 5.55 is higher than the sector average of 3.78. The company's shares are currently trading 148.5% above their Graham number. Ultimately, Deere & Company's strong cash flows, decent earnings multiple, and healthy debt levels factor towards it being fairly valued, its elevated P/B ratio notwithstanding.
Deere & Company Has an Analyst Consensus of Some Upside Potential:
The 22 analysts following Deere & Company have set target prices ranging from $305.0 to $560.0 per share, for an average of $447.64 with a buy rating. As of April 2023, the company is trading -10.3% away from its average target price, indicating that there is an analyst consensus of some upside potential.
Deere & Company has a very low short interest because 0.9% of the company's shares are sold short. Institutions own 78.8% of the company's shares, and the insider ownership rate stands at 0.19%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 8% stake in the company is worth $9,371,577,843.
