Intrinsic value of Deere - DE

Previous Close

$151.33

  Intrinsic Value

$155.05

stock screener

  Rating & Target

hold

+2%

Previous close

$151.33

 
Intrinsic value

$155.05

 
Up/down potential

+2%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of DE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 48.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -7.69
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
Revenue, $m
  26,644
  30,934
  35,571
  40,547
  45,856
  51,488
  57,437
  63,697
  70,264
  77,134
  84,308
  91,787
  99,573
  107,673
  116,095
  124,848
  133,944
  143,396
  153,220
  163,434
  174,056
  185,108
  196,611
  208,591
  221,073
  234,084
  247,653
  261,812
  276,593
  292,029
  308,157
Variable operating expenses, $m
 
  27,642
  31,773
  36,207
  40,936
  45,954
  51,255
  56,832
  62,682
  68,804
  75,195
  81,776
  88,714
  95,930
  103,433
  111,232
  119,335
  127,757
  136,509
  145,609
  155,073
  164,919
  175,168
  185,842
  196,962
  208,554
  220,644
  233,258
  246,427
  260,180
  274,549
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  23,715
  27,642
  31,773
  36,207
  40,936
  45,954
  51,255
  56,832
  62,682
  68,804
  75,195
  81,776
  88,714
  95,930
  103,433
  111,232
  119,335
  127,757
  136,509
  145,609
  155,073
  164,919
  175,168
  185,842
  196,962
  208,554
  220,644
  233,258
  246,427
  260,180
  274,549
Operating income, $m
  2,929
  3,292
  3,798
  4,341
  4,920
  5,534
  6,183
  6,865
  7,582
  8,331
  9,113
  10,010
  10,860
  11,743
  12,662
  13,616
  14,608
  15,639
  16,711
  17,825
  18,983
  20,188
  21,443
  22,749
  24,111
  25,530
  27,010
  28,554
  30,166
  31,849
  33,608
EBITDA, $m
  4,489
  4,574
  5,260
  5,995
  6,780
  7,613
  8,493
  9,418
  10,389
  11,405
  12,466
  13,572
  14,723
  15,921
  17,166
  18,460
  19,805
  21,203
  22,656
  24,166
  25,736
  27,371
  29,071
  30,843
  32,688
  34,612
  36,619
  38,712
  40,898
  43,180
  45,565
Interest expense (income), $m
  726
  1,095
  1,360
  1,647
  1,955
  2,283
  2,631
  2,999
  3,386
  3,792
  4,217
  4,660
  5,123
  5,604
  6,105
  6,626
  7,167
  7,729
  8,314
  8,921
  9,553
  10,210
  10,893
  11,604
  12,345
  13,117
  13,921
  14,760
  15,636
  16,549
  17,504
Earnings before tax, $m
  2,224
  2,197
  2,438
  2,694
  2,965
  3,251
  3,552
  3,867
  4,196
  4,539
  4,897
  5,350
  5,737
  6,139
  6,557
  6,991
  7,441
  7,910
  8,397
  8,903
  9,430
  9,979
  10,550
  11,145
  11,766
  12,413
  13,089
  13,794
  14,530
  15,300
  16,105
Tax expense, $m
  700
  593
  658
  727
  801
  878
  959
  1,044
  1,133
  1,226
  1,322
  1,445
  1,549
  1,658
  1,770
  1,887
  2,009
  2,136
  2,267
  2,404
  2,546
  2,694
  2,849
  3,009
  3,177
  3,352
  3,534
  3,724
  3,923
  4,131
  4,348
Net income, $m
  1,524
  1,604
  1,780
  1,966
  2,164
  2,373
  2,593
  2,823
  3,063
  3,313
  3,574
  3,906
  4,188
  4,481
  4,786
  5,103
  5,432
  5,774
  6,130
  6,499
  6,884
  7,285
  7,702
  8,136
  8,589
  9,062
  9,555
  10,069
  10,607
  11,169
  11,756

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,336
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  57,919
  62,241
  71,571
  81,584
  92,265
  103,598
  115,568
  128,164
  141,376
  155,200
  169,634
  184,681
  200,349
  216,647
  233,592
  251,203
  269,504
  288,523
  308,290
  328,841
  350,213
  372,450
  395,596
  419,700
  444,814
  470,993
  498,296
  526,785
  556,524
  587,583
  620,035
Adjusted assets (=assets-cash), $m
  53,583
  62,241
  71,571
  81,584
  92,265
  103,598
  115,568
  128,164
  141,376
  155,200
  169,634
  184,681
  200,349
  216,647
  233,592
  251,203
  269,504
  288,523
  308,290
  328,841
  350,213
  372,450
  395,596
  419,700
  444,814
  470,993
  498,296
  526,785
  556,524
  587,583
  620,035
Revenue / Adjusted assets
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
Average production assets, $m
  5,160
  6,001
  6,901
  7,866
  8,896
  9,989
  11,143
  12,357
  13,631
  14,964
  16,356
  17,807
  19,317
  20,889
  22,522
  24,220
  25,985
  27,819
  29,725
  31,706
  33,767
  35,911
  38,143
  40,467
  42,888
  45,412
  48,045
  50,792
  53,659
  56,654
  59,783
Working capital, $m
  0
  8,785
  10,102
  11,515
  13,023
  14,623
  16,312
  18,090
  19,955
  21,906
  23,944
  26,067
  28,279
  30,579
  32,971
  35,457
  38,040
  40,724
  43,514
  46,415
  49,432
  52,571
  55,838
  59,240
  62,785
  66,480
  70,334
  74,355
  78,552
  82,936
  87,517
Total debt, $m
  35,612
  38,860
  47,052
  55,844
  65,222
  75,172
  85,682
  96,741
  108,341
  120,479
  133,152
  146,363
  160,119
  174,429
  189,307
  204,769
  220,838
  237,536
  254,891
  272,935
  291,700
  311,224
  331,547
  352,710
  374,760
  397,745
  421,717
  446,730
  472,841
  500,111
  528,603
Total liabilities, $m
  51,399
  54,647
  62,839
  71,631
  81,009
  90,959
  101,469
  112,528
  124,128
  136,266
  148,939
  162,150
  175,906
  190,216
  205,094
  220,556
  236,625
  253,323
  270,678
  288,722
  307,487
  327,011
  347,334
  368,497
  390,547
  413,532
  437,504
  462,517
  488,628
  515,898
  544,390
Total equity, $m
  6,520
  7,593
  8,732
  9,953
  11,256
  12,639
  14,099
  15,636
  17,248
  18,934
  20,695
  22,531
  24,443
  26,431
  28,498
  30,647
  32,880
  35,200
  37,611
  40,119
  42,726
  45,439
  48,263
  51,203
  54,267
  57,461
  60,792
  64,268
  67,896
  71,685
  75,644
Total liabilities and equity, $m
  57,919
  62,240
  71,571
  81,584
  92,265
  103,598
  115,568
  128,164
  141,376
  155,200
  169,634
  184,681
  200,349
  216,647
  233,592
  251,203
  269,505
  288,523
  308,289
  328,841
  350,213
  372,450
  395,597
  419,700
  444,814
  470,993
  498,296
  526,785
  556,524
  587,583
  620,034
Debt-to-equity ratio
  5.462
  5.120
  5.390
  5.610
  5.790
  5.950
  6.080
  6.190
  6.280
  6.360
  6.430
  6.500
  6.550
  6.600
  6.640
  6.680
  6.720
  6.750
  6.780
  6.800
  6.830
  6.850
  6.870
  6.890
  6.910
  6.920
  6.940
  6.950
  6.960
  6.980
  6.990
Adjusted equity ratio
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,524
  1,604
  1,780
  1,966
  2,164
  2,373
  2,593
  2,823
  3,063
  3,313
  3,574
  3,906
  4,188
  4,481
  4,786
  5,103
  5,432
  5,774
  6,130
  6,499
  6,884
  7,285
  7,702
  8,136
  8,589
  9,062
  9,555
  10,069
  10,607
  11,169
  11,756
Depreciation, amort., depletion, $m
  1,560
  1,282
  1,462
  1,655
  1,861
  2,079
  2,310
  2,553
  2,808
  3,074
  3,353
  3,561
  3,863
  4,178
  4,504
  4,844
  5,197
  5,564
  5,945
  6,341
  6,753
  7,182
  7,629
  8,093
  8,578
  9,082
  9,609
  10,158
  10,732
  11,331
  11,957
Funds from operations, $m
  3,916
  2,886
  3,241
  3,621
  4,025
  4,453
  4,903
  5,376
  5,871
  6,388
  6,927
  7,467
  8,051
  8,659
  9,291
  9,947
  10,629
  11,338
  12,075
  12,841
  13,637
  14,467
  15,330
  16,229
  17,167
  18,144
  19,164
  20,228
  21,339
  22,500
  23,713
Change in working capital, $m
  152
  1,218
  1,317
  1,413
  1,508
  1,600
  1,690
  1,778
  1,865
  1,951
  2,037
  2,124
  2,211
  2,300
  2,392
  2,486
  2,583
  2,684
  2,790
  2,901
  3,017
  3,139
  3,267
  3,402
  3,545
  3,695
  3,854
  4,021
  4,198
  4,384
  4,580
Cash from operations, $m
  3,764
  1,668
  1,924
  2,208
  2,518
  2,853
  3,213
  3,598
  4,006
  4,437
  4,890
  5,343
  5,840
  6,359
  6,899
  7,461
  8,046
  8,653
  9,285
  9,940
  10,621
  11,328
  12,063
  12,827
  13,622
  14,449
  15,310
  16,207
  17,141
  18,116
  19,132
Maintenance CAPEX, $m
  0
  -1,032
  -1,200
  -1,380
  -1,573
  -1,779
  -1,998
  -2,229
  -2,471
  -2,726
  -2,993
  -3,271
  -3,561
  -3,863
  -4,178
  -4,504
  -4,844
  -5,197
  -5,564
  -5,945
  -6,341
  -6,753
  -7,182
  -7,629
  -8,093
  -8,578
  -9,082
  -9,609
  -10,158
  -10,732
  -11,331
New CAPEX, $m
  -2,955
  -842
  -900
  -965
  -1,030
  -1,093
  -1,154
  -1,214
  -1,274
  -1,333
  -1,392
  -1,451
  -1,511
  -1,571
  -1,634
  -1,698
  -1,765
  -1,834
  -1,906
  -1,981
  -2,061
  -2,144
  -2,232
  -2,324
  -2,421
  -2,524
  -2,632
  -2,747
  -2,867
  -2,995
  -3,129
Cash from investing activities, $m
  -1,177
  -1,874
  -2,100
  -2,345
  -2,603
  -2,872
  -3,152
  -3,443
  -3,745
  -4,059
  -4,385
  -4,722
  -5,072
  -5,434
  -5,812
  -6,202
  -6,609
  -7,031
  -7,470
  -7,926
  -8,402
  -8,897
  -9,414
  -9,953
  -10,514
  -11,102
  -11,714
  -12,356
  -13,025
  -13,727
  -14,460
Free cash flow, $m
  2,587
  -206
  -175
  -138
  -85
  -19
  61
  155
  260
  377
  505
  621
  768
  924
  1,088
  1,259
  1,437
  1,623
  1,815
  2,014
  2,219
  2,431
  2,649
  2,875
  3,107
  3,347
  3,595
  3,851
  4,116
  4,389
  4,673
Issuance/(repayment) of debt, $m
  -1,411
  7,584
  8,192
  8,792
  9,378
  9,950
  10,510
  11,059
  11,601
  12,137
  12,673
  13,211
  13,756
  14,310
  14,878
  15,463
  16,068
  16,698
  17,356
  18,044
  18,765
  19,524
  20,322
  21,163
  22,050
  22,985
  23,972
  25,013
  26,111
  27,270
  28,492
Issuance/(repurchase) of shares, $m
  -169
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,640
  7,584
  8,192
  8,792
  9,378
  9,950
  10,510
  11,059
  11,601
  12,137
  12,673
  13,211
  13,756
  14,310
  14,878
  15,463
  16,068
  16,698
  17,356
  18,044
  18,765
  19,524
  20,322
  21,163
  22,050
  22,985
  23,972
  25,013
  26,111
  27,270
  28,492
Total cash flow (excl. dividends), $m
  935
  7,379
  8,016
  8,654
  9,292
  9,931
  10,571
  11,214
  11,861
  12,515
  13,179
  13,832
  14,524
  15,234
  15,965
  16,722
  17,506
  18,321
  19,170
  20,057
  20,984
  21,955
  22,971
  24,038
  25,157
  26,332
  27,567
  28,864
  30,227
  31,659
  33,165
Retained Cash Flow (-), $m
  223
  -1,073
  -1,138
  -1,222
  -1,303
  -1,383
  -1,460
  -1,537
  -1,612
  -1,687
  -1,761
  -1,836
  -1,911
  -1,988
  -2,067
  -2,149
  -2,233
  -2,320
  -2,412
  -2,507
  -2,607
  -2,713
  -2,824
  -2,941
  -3,064
  -3,194
  -3,331
  -3,476
  -3,628
  -3,789
  -3,959
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  6,305
  6,878
  7,432
  7,989
  8,549
  9,111
  9,677
  10,249
  10,828
  11,418
  11,997
  12,612
  13,245
  13,898
  14,573
  15,273
  16,001
  16,759
  17,550
  18,377
  19,242
  20,148
  21,097
  22,093
  23,139
  24,236
  25,388
  26,599
  27,870
  29,206
Discount rate, %
 
  11.20
  11.76
  12.35
  12.97
  13.61
  14.29
  15.01
  15.76
  16.55
  17.37
  18.24
  19.16
  20.11
  21.12
  22.18
  23.28
  24.45
  25.67
  26.95
  28.30
  29.72
  31.20
  32.76
  34.40
  36.12
  37.93
  39.82
  41.81
  43.91
  46.10
PV of cash for distribution, $m
 
  5,670
  5,507
  5,241
  4,906
  4,516
  4,087
  3,636
  3,179
  2,729
  2,301
  1,899
  1,540
  1,223
  951
  722
  536
  388
  274
  188
  126
  82
  51
  31
  18
  10
  6
  3
  2
  1
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Deere & Company is engaged in equipment operations. The Company is engaged in providing financial services. The Company operates through three business segments: agriculture and turf, construction and forestry, and financial services. The agriculture and turf segment manufactures and distributes a line of agriculture and turf equipment and related service parts. The construction and forestry segment provides a line of construction equipment, and forestry machines and attachments available in the world. The construction and forestry segment is also engaged in providing fleet management telematics solutions. The financial services segment primarily finances sales and leases by the Company dealers of new and used agriculture and turf equipment and construction and forestry equipment. The financial services segment also provides wholesale financing to dealers of the foregoing equipment, finances retail revolving charge accounts and offers extended equipment warranties.

FINANCIAL RATIOS  of  Deere (DE)

Valuation Ratios
P/E Ratio 31.3
Price to Sales 1.8
Price to Book 7.3
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow 58.9
Growth Rates
Sales Growth Rate -7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.6%
Cap. Spend. - 3 Yr. Gr. Rate 4.5%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 363.5%
Total Debt to Equity 546.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 23%
Return On Equity - 3 Yr. Avg. 26.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 26.6%
Gross Margin - 3 Yr. Avg. 26.8%
EBITDA Margin 16.9%
EBITDA Margin - 3 Yr. Avg. 17.5%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 12.2%
Pre-Tax Margin 8.3%
Pre-Tax Margin - 3 Yr. Avg. 10.4%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 31.5%
Eff/ Tax Rate - 3 Yr. Avg. 31.9%
Payout Ratio 49.9%

DE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DE stock intrinsic value calculation we used $26644 million for the last fiscal year's total revenue generated by Deere. The default revenue input number comes from 2016 income statement of Deere. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DE stock valuation model: a) initial revenue growth rate of 16.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 11.2%, whose default value for DE is calculated based on our internal credit rating of Deere, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Deere.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DE stock the variable cost ratio is equal to 89.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for DE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Deere.

Corporate tax rate of 27% is the nominal tax rate for Deere. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DE are equal to 19.4%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Deere operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DE is equal to 28.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6520 million for Deere - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 321.332 million for Deere is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Deere at the current share price and the inputted number of shares is $48.6 billion.

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COMPANY NEWS

▶ The Most Wonderful Time Of The Year For Stocks   [Dec-04-17 03:42PM  Forbes]
▶ What Deere Purchase Means for AgTech Startup Industry   [Dec-02-17 12:48PM  TheStreet.com]
▶ Top Stock Reports for JPMorgan, Deere & VMware   [Dec-01-17 05:43PM  Zacks]
▶ 3 Industrial Stocks to Buy As Tech Dips   [Nov-29-17 05:59PM  Zacks]
▶ Deere Reports Strong Fiscal 4Q17 Earnings   [08:12AM  Market Realist]
▶ Analysts Raise Deeres Target Price after 4Q17   [07:31AM  Market Realist]
▶ [$$] Bill Gates Finds Redemption   [Nov-24-17 02:02PM  Barrons.com]
▶ Company News For Nov 24, 2017   [10:32AM  Zacks]
▶ [$$] Good as It Gets for Deere Stock   [Nov-23-17 11:56PM  The Wall Street Journal]
▶ Deere and Axalta climb while Hewlett Packard Enterprise dips   [Nov-22-17 04:53PM  Associated Press]
▶ H.P. among the IQ100 laggards   [02:54PM  CNBC Videos]
▶ [$$] Deere Earnings Helped by Equipment Demand   [12:32PM  The Wall Street Journal]
▶ Thanksgiving Day Ahead   [10:33AM  Zacks]
▶ Deere's profit leaps 79 percent   [10:23AM  Reuters Videos]
▶ Deere beats Street 4Q forecasts   [06:41AM  Associated Press]
▶ John Deere, Amazon and Singapore Airlines among the most-recommended brands   [Nov-21-17 04:26PM  American City Business Journals]
▶ [$$] Deere Earnings: What to Watch   [01:20PM  The Wall Street Journal]
▶ Deeres Valuation before Its Fiscal 4Q17 Earnings   [Nov-16-17 09:01AM  Market Realist]
▶ Can Caterpillar's Stock Continue to Soar?   [06:17AM  Motley Fool]
▶ What Could Drive Deeres Earnings in Fiscal 4Q17?   [Nov-15-17 01:10PM  Market Realist]
▶ Industrials top components Nov-Dec   [12:46PM  CNBC Videos]
Financial statements of DE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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