DE
Deere & Company
$585.64
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Overvalued
Trading 6.5% above fair value
You pay
$585.64
Bear
$444.99
Fair
$549.69
Bull
$654.39
Bear
$444.99
-24.0%
$23.28 × 20x + net cash
Fair
$549.69
-6.1%
$23.28 × 24x + net cash
Bull
$654.39
+11.7%
$23.28 × 28x + net cash
Key Value Driver
Through-cycle normalized EPS ($23.28)
Implied Market Multiple
25.2x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $691.58 from 46 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $549.69 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 7.7x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $691.58 (from 46 analysts). Our estimate is 29% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing