DCF Studio

    DE · NYQ · Industrials

    Deere & Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 58.72

    Market price

    USD 683.99

    Implied upside

    -91.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis model values the shares at 8.6% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedCapital expenditure runs at 8.4% of revenue against depreciation of 4.1%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 22.5x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 58.72-91.4%
    Exit multiple
    USD 318.90-53.4%
    Market price
    USD 683.99

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 42.7bnUSD 40.7bnUSD 38.9bnUSD 37.2bnUSD 35.5bn-4.5%
    EBITUSD 8.9bnUSD 8.5bnUSD 8.1bnUSD 7.7bnUSD 7.4bn-4.5%
    NOPATUSD 7.0bnUSD 6.7bnUSD 6.4bnUSD 6.1bnUSD 5.8bn-4.5%
    Add depreciation & amortisationUSD 1.7bnUSD 1.7bnUSD 1.6bnUSD 1.5bnUSD 1.4bn-4.5%
    Less capital expenditureUSD -3.6bnUSD -3.4bnUSD -3.3bnUSD -3.1bnUSD -3.0bn-4.5%
    Less increase in working capitalUSD -37.4mUSD -35.7mUSD -34.1mUSD -32.6mUSD -31.1m-4.5%
    Free cashflow to firmUSD 5.1bnUSD 4.9bnUSD 4.7bnUSD 4.4bnUSD 4.2bn-4.5%
    Discount factor0.95980.88410.81430.75010.6909-
    Present valueUSD 4.9bnUSD 4.3bnUSD 3.8bnUSD 3.3bnUSD 2.9bn-12.0%
    Present Value Of The ForecastUSD 19.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.940Reported 0.911, pulled toward 1.0 (Blume)
    Cost of equity10.17%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 184.4bn74.2% of capital
    Total debtUSD 64.3bn25.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.56%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 58.72

    73% of EV

    Forecast FCFF, final year
    USD 4.2bn
    Capex at depreciation, working capital in reinvestment
    USD 5.8bn
    Less reinvestment at g/ROIC (24.8% of NOPAT)
    USD -1.4bn
    Capitalised
    USD 4.4bn
    ROIC (reported)
    10.1%
    Terminal value, undiscounted
    USD 74.2bn
    Terminal value, discounted
    USD 51.2bn
    Enterprise value
    USD 70.5bn
    Less net debt
    USD 54.6bn
    Equity value
    USD 16.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 318.90

    86% of EV

    Terminal value, undiscounted
    USD 176.5bn
    Terminal value, discounted
    USD 121.9bn
    Enterprise value
    USD 141.2bn
    Less net debt
    USD 54.6bn
    Equity value
    USD 86.6bn

    Spread between methods: 138%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.56%148.47162.24179.20200.70228.95
    7.56%92.0498.96107.08116.83128.78
    8.56%51.6154.9658.7363.0468.06
    9.56%21.2322.5924.0325.5927.29
    10.56%-1.37-0.72-0.070.581.22

    Outlined: this model. Green text: above today's price of 683.99. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-4.5%24.8%+29.3pp
    EBIT margin20.8%66.3%+45.5pp
    Discount rate8.6%4.2%-4.4pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.