Deere & Company

Technical Analysis

Deere & Company (DE) has demonstrated exceptionally strong momentum, posting impressive double-digit returns over recent months that significantly outpace the broader market. While trading near its 52-week high suggests potential overbought conditions, its relatively modest maximum drawdown of -18.91% over the past year indicates reasonable resilience during pullbacks. The stock’s beta close to 1.0 indicates it moves largely in line with the market, offering steady performance without excessive volatility.

Fundamentals Analysis

DE’s Q4 2025 revenue increased, but profitability weakened due to margin contraction and higher operating expenses, signaling earnings pressure despite top-line growth. The company maintains solid liquidity but operates with considerable leverage, reflected in a high debt-to-equital ratio and modest cash flow relative to debt. Operational efficiency is a concern, with weak asset turnover and a lengthy cash conversion cycle indicating suboptimal working capital management.

Valuation Analysis

Deere’s valuation appears elevated, with a trailing P/E of 32.58 and forward P/E of 29.31 well above historical market averages. The extremely high EV/EBITDA ratio further underscores its rich pricing relative to operational earnings. A negative PEG ratio suggests analysts anticipate declining earnings growth, which may not justify its current premium valuation if those expectations materialize.

Risk Analysis

DE carries moderate systematic risk, mirroring overall market volatility with a beta near 1.0 and a manageable maximum drawdown. High liquidity and negligible short interest reduce technical risks. The primary concerns revolve around exposure to cyclical agricultural demand and commodity price swings, which could impact earnings consistency.

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Buy Recommendation

Deere remains a high-quality industrial leader with strong market momentum and a powerful brand, but its current valuation appears stretched relative to earnings fundamentals. Investors should consider waiting for a pullback or clearer signs of margin stabilization before initiating a position. The stock is better suited for those with a long-term horizon who can tolerate cyclical volatility. Hold for now; consider buying on weakness.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the comprehensive analysis, here is the 12-month outlook for Deere & Company (DE):

Over the next 12 months, the key catalyst for DE will be its ability to stabilize margins and improve operational efficiency to better justify its premium valuation. However, the primary risk is the heightened exposure to a cyclical downturn in the agricultural sector, which could pressure earnings and amplify concerns about its stretched valuation metrics. While no specific analyst target is provided, the stock's near-term performance is likely to be range-bound or face downward pressure unless profitability improves, making a pullback toward more historically supportive valuation levels a more attractive entry point for long-term investors.

Wall Street Consensus

Most Wall Street analysts are optimistic about Deere & Company's 12-month outlook, with consensus target around $662.00, indicating expected upside potential.

Overall, DE has investment potential but also faces challenges. Here are key factors to weigh before investing.

DE has demonstrated exceptionally strong performance with substantial gains across all measured timeframes while significantly outperforming the broader market.

The stock has delivered impressive short-term returns with 15.74% and 23.84% gains over the past one and three months respectively, significantly outperforming the market by over 23 percentage points in the three-month period. This substantial alpha generation, combined with a beta near 1.0, indicates strong relative performance without excessive volatility relative to the market.

Currently trading at approximately 95% of its 52-week high, DE is positioned near the upper end of its annual range, suggesting the stock is approaching overbought territory after its recent strong advance. However, with a maximum drawdown of only -18.91% over the past year, the stock has demonstrated relative resilience during any pullbacks.

Revenue & Profitability DE's Q4 2025 revenue increased to $12.1 billion (up from $11.8 billion in Q3), but profitability metrics weakened, with net profit margin declining from 10.9% to 8.8% quarter-over-quarter. The decrease was driven by a contraction in gross margin (32.6% vs. 35.8%) and higher operating expenses relative to sales, indicating pressure on earnings despite top-line growth.

Financial Health The company maintains solid liquidity with a current ratio of 2.31, but carries significant leverage evidenced by a debt-to-equity ratio of 2.46 and total debt-to-capitalization of 71.1%. Operating cash flow remains healthy at $14.78 per share, though the cash flow-to-debt ratio of 0.06 suggests modest capacity for debt servicing from operational inflows.

Operational Efficiency Operational efficiency appears challenged, with return on equity at 4.1% and asset turnover of just 0.11, reflecting suboptimal utilization of assets to generate revenue. The extended cash conversion cycle of 475 days, driven by high days sales outstanding (425 days), indicates inefficient working capital management and potential strain on cash generation efficiency.

**Valuation Level**

Deere & Company's valuation appears elevated based on its current earnings. The trailing P/E of 32.58 significantly exceeds the broader market average (historically around 15-20), suggesting investors are paying a high premium for its past earnings. This is reinforced by a high forward P/E of 29.31 and an exceptionally high EV/EBITDA of 65.69, both of which signal that the stock is priced richly relative to its core operating profitability.

**Peer Comparison**

A direct peer comparison is not possible without specific industry average data. However, within the industrial machinery sector, Deere's metrics are typically among the highest due to its strong brand and cyclical earnings power. The negative PEG ratio of -1.70 indicates that analyst earnings growth expectations are negative, which is a significant concern and contrasts with the high P/E ratios, potentially pointing to overvaluation if the anticipated earnings decline materializes.

Volatility Risk Analysis: With a Beta of 1.004, DE exhibits volatility nearly identical to the broader market, indicating moderate systematic risk. Recent performance shows a maximum drawdown of -18.91% over the past year, reflecting typical market-correlated downside exposure. This drawdown level suggests acceptable volatility for investors with moderate risk tolerance.

Other Risk Analysis: The absence of notable short interest implies minimal bearish sentiment and reduces the risk of a short squeeze scenario. DE's substantial market capitalization ensures strong liquidity, facilitating efficient trade execution. Primary risks likely stem from cyclical agricultural demand and exposure to commodity price fluctuations rather than technical factors.