Deere & Co (DE, Financial) recently reported a daily loss of 3.07%, yet it has seen a gain of 11.09% over the past three months. With an impressive Earnings Per Share (EPS) of 34.34, investors might wonder: is Deere modestly undervalued? This analysis aims to explore Deere's current market valuation using the GF Value, providing insights into whether now might be a strategic buying opportunity.
Company Overview
Deere, a leading name in the agricultural equipment sector, boasts a substantial presence both in North America and globally with over 2,000 dealer locations in North America and approximately 3,700 worldwide. The company operates through four main segments: production and precision agriculture, small agriculture and turf, construction and forestry, and John Deere Capital. The latter supports sales by providing retail and wholesale financing for Deere's products. As of now, Deere's market cap stands at $111.70 billion, with sales reaching $59.70 billion and an operating margin of 24.38%.
Understanding GF Value
The GF Value is a unique measure used to estimate the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. This metric suggests that Deere (DE, Financial) is currently modestly undervalued, with a GF Value of $486.53 per share, compared to its current trading price of $401.29. This discrepancy indicates potential for higher future returns, assuming the stock adjusts to its fair value.
Financial Strength and Risks
Investors must consider financial strength to avoid high risks of capital loss. Deere's cash-to-debt ratio is 0.1, ranking lower than 84.47% of industry peers, suggesting a potential area of concern. The company's overall financial strength is rated 5 out of 10 by GuruFocus, indicating a fair status but highlighting the importance of cautious evaluation.
Profitability and Growth Prospects
Deere has maintained profitability over the past decade, with a robust operating margin of 24.38%, ranking higher than 96.12% of its competitors. The company's 3-year average annual revenue growth rate stands at 23.2%, showcasing its capability to expand effectively. Such strong profitability and growth metrics contribute positively to its valuation.
Return on Invested Capital vs. Weighted Average Cost of Capital
Comparing Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) provides insight into financial efficiency. Deere's ROIC is 13.77%, significantly higher than its WACC of 8.12%, indicating effective management of capital and promising shareholder returns.
Conclusion
In conclusion, Deere (DE, Financial) appears to be modestly undervalued based on its current market price and GF Value. With strong financial health, impressive profitability, and growth prospects, Deere presents a potentially lucrative opportunity for value investors. For a deeper dive into Deere's financials, consider exploring its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
