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Reverse DCF · DE

What DE's Stock Price Is Really Betting On

The short answer

At today's price, Deere's stock is pricing in about 11.8% annual free-cash-flow growth for the next ten years. Over the past five years, the company's actual FCF shrank 3.0% a year — though the past five years span a sharp post-COVID agricultural downcycle, and trailing-twelve-month FCF is already up 9.5% year over year, a recovery signal worth weighing.

Timing note This analysis uses the Aug 19, 2026 closing price, the day before Deere's Q3 FY2026 earnings release (Aug 20). The stock had already moved to $593.35 (+2.2%) in premarket trading the following morning — recalculate this analysis after earnings for an up-to-date read.
The conclusion

At its current price, DE implies ~11.8% annual FCF growth for the next 10 years, discounted at 9%.

Deere's actual 5-year FCF growth has averaged -3.0% a year; revenue grew just +0.9% a year over the same span.

Verdict: the market expects far better than the past five years This isn't a "sell" signal — the past five years span a sharp post-pandemic agricultural downcycle, which likely understates the "normal" trend. Trailing-twelve-month FCF is already up 9.5% year over year, a real recovery signal. But whether that recovery translates into 11-12% growth sustained for a full decade is a separate question this math alone can't answer.

Required growth vs. historical growth

Market's ask (WACC 9%)
11.8%
5-yr revenue CAGR
+0.9%
5-yr FCF CAGR
-3.0%
Recent 3-yr FCF CAGR (deep downcycle)
-7.3%
TTM FCF growth (YoY)
+9.5%

Required growth from the reverse DCF below. Historical figures from 10-K cash flow statements FY2021-FY2025 and 10-Q Q2 FY2026.

Sensitivity: what if the discount rate moves?

Required 10-year FCF growth by discount rate (WACC)
WACCRequired growth
8%9.4%
9% (base case)11.8%
10%14.1%
12%18.1%

Even at the most favorable discount rate tested (8%), the required growth rate (9.4%) still sits well above the 5-year actual FCF pace.

What would move this number

  • Using FY2025-alone FCF ($6,099M) instead of trailing-twelve-month ($6,677M) raises the required growth rate from 11.8% to 13.0%.
  • Lowering the terminal growth rate from 2.5% to 2.0% raises the required growth rate modestly (about 0.3-0.5 percentage points).
  • Extending the high-growth projection window from 10 to 15 years lowers the required annual growth rate somewhat, since the same total value can be reached with a slower but longer climb.

Show your work

Inputs, sources, model assumptions, and the calculation
  • Share price$580.63 — Aug 19, 2026 close (pre-earnings), stockanalysis.com
  • Diluted shares outstanding270.8M — 10-Q Q2 FY2026 (filed May 28, 2026)
  • Trailing-twelve-month FCF$6,677M — FY2025 FCF ($6,099M) minus H1 FY2025 FCF ($13M) plus H1 FY2026 FCF ($591M)
  • Net debt$55,917M — 10-Q Q2 FY2026 (May 3, 2026): total debt $63,822M minus cash $7,905M
  • Discount rate (WACC)9% base case (8%/10%/12% tested) — large stable-industrial default
  • Terminal growth rate2.5% — long-run GDP-level assumption

Normalization check: the three-year (FY2023-2025) average FCF is $6,927M. Trailing-twelve-month FCF ($6,677M) is -3.6% below that average — well within the ±40% threshold, so used as-is without adjustment.

Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's enterprise value (market cap + net debt).

The fine print

This number is a starting point, not an answer
  • Change the discount rate, the FCF base, the projection window, or the terminal growth rate, and the answer moves — see the sensitivity table above.
  • A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
  • Today's (Aug 20, 2026) Q3 FY2026 earnings could move the price meaningfully — this entire calculation would need to be redone with updated numbers.
  • Whether 11.8% growth is realistic depends on whether the agricultural cycle has actually bottomed and how the Right to Repair litigation resolves — not on this math alone.
  • Any investment decision, and its outcome, is your own responsibility.
Built from Deere & Company's 10-K (FY2025) and 10-Q (Q2 FY2025, Q2 FY2026) filings, plus a web search for the current share price (stockanalysis.com, Aug 19, 2026, pre-earnings close). This tells you where to dig deeper — it is not a buy or sell signal.

Frequently asked questions

What growth rate does DE's stock price assume?

At today's price, Deere's stock is pricing in about 11.8% annual free-cash-flow growth for the next ten years.

How does that compare to Deere's actual growth?

Over the past five years, Deere's actual free-cash-flow shrank 3.0% a year, spanning a sharp post-COVID agricultural downcycle — but trailing-twelve-month FCF is already up 9.5% year over year, a recovery signal worth weighing against the ~11.8% the price requires.

What share price was used for this analysis?

This analysis used $580.63, as of Aug 19, 2026 (pre-earnings close).