While the broader market has struggled with the S&P 500 down 1.8% since October 2025, Deere has surged ahead as its stock price has climbed by 33.6% to $609.30 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Deere, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Deere Not Exciting?
We’re happy investors have made money, but we don't have much confidence in Deere. Here are three reasons why DE doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Deere’s sales grew at a tepid 4.8% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector.
2. New Investments Fail to Bear Fruit as ROIC Declines
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Deere’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
3. High Debt Levels Increase Risk
Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.
Deere’s $62.48 billion of debt exceeds the $8.20 billion of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $8.27 billion over the last 12 months) shows the company is overleveraged.
At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Deere could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.
We hope Deere can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
Deere isn’t a terrible business, but it doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at 30.5× forward P/E (or $609.30 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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