DE

Based on a comprehensive review, Deere & Company (DE) presents a complex investment case. While showing strong recent price momentum and solid financial health, the stock faces significant headwinds from weakening profitability, high leverage, and a valuation that appears stretched relative to current earnings. Operational efficiency is a concern, and the stock's beta indicates it is unlikely to decouple from broader market volatility.

The primary appeal lies in its market-leading position and recent outperformance. However, the current price near the upper end of its 52-week range, combined with premium valuation multiples and margin pressures, suggests limited near-term upside. The risk/reward profile appears balanced to slightly unfavorable for new capital at this level.

Recommendation: HOLD. For existing shareholders, DE's strong brand and market position may justify maintaining a position. For new investors, it may be prudent to wait for a more attractive entry point, such as a pullback from current levels or clearer signs of improved operational efficiency and sustained margin recovery. The stock is best suited for investors with a long-term horizon who are comfortable with its cyclical nature.

RockFlow Model Forecast: Three Scenarios for 2026

Based on a comprehensive review of Deere & Company's (DE) current positioning:

The 12-month outlook for DE is expected to be challenged, with limited upside from the current price near its 52-week high. Key positive catalysts include its unassailable market-leading position in agriculture and construction equipment, which provides a strong foundation, and potential for cyclical recovery in farm incomes. However, significant risks dominate the near-term picture, including sustained pressure on profit margins, high financial leverage that could amplify a downturn, and a valuation that appears rich relative to near-term earnings potential. Without a clear analyst target consensus, the risk/reward profile suggests a trading range-bound outlook, likely between the mid-$400s to low-$500s, contingent on broader economic conditions.

Wall Street Consensus

Most Wall Street analysts are optimistic about DE's 12-month outlook, with consensus target around $512.10, indicating expected upside potential.

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

DE has demonstrated strong outperformance against the market over recent months, achieving near double-digit gains. The stock has exhibited a steady recovery from its 52-week lows, displaying significant upward momentum. This performance reflects robust bullish sentiment surrounding the company.

Over the past one and three months, DE delivered returns of 4.95% and 9.49% respectively, significantly outpacing the general market by 6.12% over the three-month period. This consistent short-term outperformance, coupled with a beta near 1.0, indicates the stock has generated strong alpha without excessive volatility relative to the broader market. The price action suggests sustained positive momentum.

Currently trading at $499.52, DE sits approximately in the 67th percentile of its 52-week range, positioning it closer to the upper bound. While not yet at extreme overbought levels, the stock is nearing the higher end of its annual trading band. Given its substantial rally from the lows and a 1-year maximum drawdown of -18.91%, the risk/reward profile warrants caution for new investments at current levels.

Revenue & Profitability DE's Q4 2025 revenue increased to $120.94B from Q3's $117.83B, showing modest sequential growth. However, margins weakened notably, with the gross profit ratio declining from 35.8% to 32.6% and the net profit margin falling from 10.9% to 8.8%, indicating pressure on profitability despite higher sales.

Financial Health The company maintains a strong liquidity position with a current ratio of 2.31 and quick ratio of 2.08. However, the debt-equity ratio of 2.46 and total debt to capitalization of 71.1% reflect significant leverage, while the modest interest coverage of 2.49 warrants monitoring given rising interest expenses.

Operational Efficiency Operational metrics show challenges, with ROE at 4.1% and asset turnover of just 0.11, indicating inefficient utilization of assets. The extended cash conversion cycle of 475 days, driven by high days sales outstanding of 425, suggests working capital management could be improved to enhance returns.

Valuation Level Assessment

DE's current valuation metrics present a mixed picture. The trailing PE of 26.55 and forward PE of 29.31 suggest a premium valuation, which is further supported by a high PB ratio of 5.11. However, the significantly negative PEG ratio of -1.70 and an exceptionally high EV/EBITDA of 65.69 are major red flags, indicating the market is pricing in substantial future growth that may not be materializing or that current earnings are depressed. The PS ratio of 2.91 is not excessively high on its own, but in the context of the other metrics, it points towards a stock that appears richly valued relative to its current profitability.

Peer Comparison

Unfortunately, a direct peer comparison cannot be performed as the specific industry average data is not available. To accurately assess whether DE is overvalued or undervalued relative to its competitors, it would be essential to compare its PE, PB, and PS ratios against the median or average figures for the Agricultural & Farm Machinery industry. Without this benchmark, the analysis remains incomplete, and it is difficult to contextualize DE's valuation multiples within its market segment.

Based on the provided metrics, DE carries volatility risks that warrant consideration. With a beta of 1.01, the stock's price movement is expected to be nearly identical to the broader market, indicating it offers little insulation from general market downturns. This is compounded by a significant one-year maximum drawdown of -18.91%, demonstrating that the stock has experienced substantial peak-to-trough declines, which could test the risk tolerance of investors during periods of market stress.

Regarding other risks, the absence of notable short interest suggests that professional investors do not currently have a strong, concentrated bearish outlook on the stock. However, this does not eliminate company-specific risks such as exposure to cyclical agricultural demand, commodity price fluctuations, or geopolitical tensions affecting global trade. The lack of explicit liquidity data means this area should be verified separately, as poor liquidity could exacerbate price declines during sell-offs.