By Rob Otman
John Deere (NYSE:DE) is a $37 billion company today. Investors that bought shares one year ago are sitting on a 39.65% total return. That's above the S&P 500's return of 17.6%.
John Deere stock is beating the market, and it reports earnings tomorrow. But does that make it a good buy today? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics...
✗ Earnings per Share (EPS) Growth: John Deere reported a recent EPS growth rate of -23.75%. That's below the machinery industry average of 58.99%. That's not a good sign. We like to see companies that have higher earnings growth.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the machinery industry is 27.59. And John Deere's ratio comes in at 24.59. It's trading at a better value than many of its competitors.
✗ Debt-to-Equity: The debt-to-equity ratio for John Deere stock is 504.82%. That's above the machinery industry average of 97.88%. That's not a good sign. John Deere's debt levels should be lower.
✓ Free Cash Flow per Share Growth: John Deere's FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.
✗ Profit Margins: The profit margin of John Deere comes in at 3.45% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. John Deere's profit margin is below the machinery average of 8.7%. So that's a negative indicator for investors.
✓ Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for John Deere is 21.81%, and that's above its industry average ROE of 16.73%.
John Deere stock passes three of our six key metrics today. That's why our Investment U Stock Grader rates it as a Hold.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing.
Disclosure: We expressly forbid our writers from having a financial interest in their own securities recommendations to readers. All of our employees and agents must wait 24 hours after online publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.