Valuation -- 4/10
DE trades at ~30x forward P/E and ~25x EV/EBITDA -- a premium valuation for a cyclical industrial
in the third year of an ag downturn. While precision ag technology provides a credible long-term
catalyst and management has executed well through the cycle, the risk/reward is unfavorable at
current levels. Peers trade at meaningful discounts, historical trough multiples are far lower,
and macro headwinds (tariffs, farm income, trade policy) remain unresolved. The market is pricing
in a perfect cycle inflection that has yet to materialize. A more attractive entry would be at
20-22x forward P/E (~$380-420).
Weight: 15%
Forward P/E
30.5x
10-yr median ~19x
Trailing P/E
32.5x
10-yr high ~39x
EV/EBITDA
24.9x
vs CNH ~13.5x, AGCO ~10.3x
Price / Mkt Cap
$575.71
$155.5B market cap
Peer valuation comparison
| Company |
Forward P/E |
Trailing P/E |
EV/EBITDA |
| Deere (DE) |
30.5x |
32.5x |
24.9x |
| Caterpillar (CAT) |
~30.8x |
~30x |
~25.4x |
| CNH Industrial (CNH) |
~23.4x |
~22x |
~13.5x |
| AGCO Corp (AGCO) |
~18.7x |
~14x |
~10.3x |
| Key Takeaway |
DE forward P/E is 63% above CNH and AGCO. The current 32x trailing multiple sits 68% above the 10-year median of ~19x and near the 10-year high of ~39x. At the Oct 2023 trough, DE briefly touched ~10x trailing P/E at $361. |
Peer multiples are approximate and based on consensus estimates. DE data as of April 2026.
Data sourced from Daloopa and public filings.
Financial trajectory: earnings in decline
| Metric |
FY2023 |
FY2024 |
FY2025 |
FY2026E |
| Total Revenue |
$61.3B |
$51.7B |
$45.7B |
~$48-49B |
| Net Sales (Equipment) |
$55.6B |
$44.8B |
$38.9B |
~$41-42B |
| Net Income |
$10.2B |
$7.1B |
$5.0B |
$4.5-5.0B |
| Implied EBITDA |
~$14.5B |
~$11.1B |
~$9.0B |
~$8.5-9.0B |
Revenue has declined from $61.3B to $45.7B (-25.5%) over FY23-FY25. Net income has halved.
The stock is down just 15% from its all-time high. FYE October 31.
Data sourced from Daloopa.
Risk/reward scenario analysis
| Scenario |
Probability |
Target |
Return |
| Bull: Cycle inflects H2 FY26, FY27 EPS $22+ |
25% |
$700 |
+22% |
| Base: Gradual recovery FY27, EPS $19-20 |
45% |
$580 |
+1% |
| Bear: Cycle extends, tariffs persist, EPS $16-17 |
30% |
$440 |
-24% |
| Probability-Weighted Return |
|
|
-3% |
Expected return is modestly negative, reflecting that the stock already prices in the base-to-bull case.
At 30x forward earnings on trough EPS, the asymmetry is unfavorable.
Key catalysts (bull case)
| # |
Catalyst |
Timeline |
Magnitude |
Probability |
| 1 |
Precision ag technology and recurring revenue |
2026-2030 |
High |
Medium |
| Targeting 10% of revenue from subscriptions by 2030 (~$5-6B). See & Spray covered 5M acres in FY25 (vs 1M FY24) with ~50% herbicide savings. 24,000+ Precision Essentials retrofit orders. 500M engaged acres on Operations Center (+10% YoY). Strongest long-term bull case, but still early-stage (<5% of sales today). |
| 2 |
Ag cycle inflection in FY27 |
FY27 (CY late 2026) |
High |
Medium |
| Management states 2026 is the bottom. FY27E consensus revenue growth +9.7%. Fleet age elevated with 2-3 years of deferred replacement demand. Factories running lean -- high operating leverage on incremental volume. Used inventory improving (late-model 8R tractors down 25% from peak). |
| 3 |
Construction and Forestry recovery |
FY26-FY27 |
Medium-High |
High |
| C&F order bank up 50%+ in FQ1 FY26 to highest since May 2024. Retail settlements up mid-teens YoY. Infrastructure (IIJA), data center construction, rental fleet replacement provide multi-year tailwinds. C&F net sales guided up ~15% in FY26. |
| 4 |
Biofuels policy tailwinds |
2026-2027 |
Medium |
Medium-High |
| EPA proposed higher biomass-based diesel targets for 2026-2027. E15 legalized year-round in California. U.S. corn ethanol exports approaching record highs; soybean crush at all-time highs. Structural demand drivers for corn/soy support commodity prices and farmer incomes. |
| 5 |
International growth opportunities |
Ongoing |
Medium |
Medium |
| Europe projected flat to up 5% with robust dairy margins. India remains a long-term growth market. Brazil: strong enthusiasm for Deere solutions with ongoing investment in local manufacturing and channel. |
Key risks (bear case)
| # |
Risk |
Severity |
Probability |
Detail |
| 1 |
Valuation disconnect: priced for recovery |
HIGH |
High |
33x midpoint FY26 EPS -- a recovery multiple on trough earnings. No margin of safety if cycle does not inflect in FY27. Net income down ~55% from FY23 peak while stock down only ~15%. |
| 2 |
Tariff headwind: $1.2B pretax in FY26 |
HIGH |
Medium-High |
IEPA tariffs ~half, Section 232 steel the remainder. Price/cost roughly neutral inclusive of tariffs -- absorbing significant cost without margin expansion. Supreme Court IEPA ruling pending. |
| 3 |
Farm income declining, no clear trough |
HIGH |
Medium-High |
USDA forecasts 2026 net farm income at $153.4B, down 0.7% nominal, down 2.6% real. 15-year discrepancy between cost of production and prices received. Government payments ($40B+) are a bridge, not a foundation. |
| 4 |
China/trade policy uncertainty |
MED-HIGH |
Medium |
China purchased ~2M tons of U.S. soybeans since Oct 2024 vs 12M planned. Indirect impact on commodity prices and farmer purchasing power is significant. Escalation delays ag cycle recovery. |
| 5 |
Used equipment overhang |
MEDIUM |
Medium |
Late-model used tractors down 20%+ but management says more work remains. Pool funds (dealer incentives) deployed at elevated levels -- a direct margin headwind constraining new equipment demand. |
Score rationale
Score of 4/10 reflects an unfavorable risk/reward at current prices. DE is a best-in-class franchise with genuine technology differentiation, but at 30x forward P/E on cyclically depressed earnings, the market has already priced in a recovery that remains uncertain. The probability-weighted expected return is modestly negative (-3%).
Why not higher (5-6): At ~30x forward on trough earnings, the valuation offers no margin of safety. Three consecutive years of net income decline (from $10.2B to ~$4.75B midpoint FY26E), yet the stock sits just 15% below its all-time high. Tariffs ($1.2B pretax FY26), declining farm income, and trade policy volatility are unresolved and material headwinds. The precision ag recurring revenue story is real but early-stage (<5% of sales). Pure-play ag peers CNH and AGCO trade at 63% discounts on forward P/E. Historical trough multiples (10-15x) are far below current levels.
Why not lower (2-3): The franchise quality is exceptional -- effective NA large ag oligopoly with pricing power through cycles. Precision ag and autonomy provide a credible long-term re-rating catalyst. C&F is inflecting with order bank up 50%+ and guided +15% revenue growth. Management has executed well through the downturn with factories running lean. Fleet age is elevated with 2-3 years of deferred demand. The cycle will eventually turn, and operating leverage will be significant on incremental volume.
Net assessment: The concern profile outweighs the catalyst profile at current prices. A more attractive entry point would be 20-22x forward P/E (~$380-420), which would provide adequate margin of safety for a cyclical trough investment. At $575, the risk/reward is asymmetrically skewed to the downside.
Data sourced from Daloopa, company earnings transcripts, USDA farm income forecasts, and public consensus estimates. Analysis as of April 2026.