Analysis of Deere 2016

Company: Deere

ISIN US2441991054 | WKN 850866

Business: An American outdoor machine producer. They have eight different product categories: Residential (lawn mowers), Agriculture (tractors etc.), Construction (Trucks and Loaders), Landscaping & Grounds Care (commercial lawn mowers), Golf & Sports (fairway mowers etc.), Forestry (harvesters and dozers), Engines & Drivetrain (diesel engines and generators), Specialized (military and rental). Their largest is however Agriculture and most people in countries conducting modern agriculture will have have seen the beautiful Deere logo.

Active: 30 countries world wide. Focus on US, Canada, Europe, Brazil, Russia, India and China. I was surprised to see that they did not mentioned Africa but maybe the infrastructure need to improve much more before Deere can establish themselves stronger there.

P /E: 22.60

Here you can find the previous analysis of Deere 2015.

The P/E of Deere is too high for me with 22.6 and the P/B is also awful with 5.3 which giver a very clear no go from Graham. The earnings to sales looks good with 7% and the ROE is also excellent with 23% but the book to debt ratio is scary and looks like a bank. Yes, they do plenty of financing so I know where it comes from but it still looks scary.

In the last five years they have managed to have a yearly negative growth rate of -7% which gives us a motivated P/E of around 8 which means Deere is today highly overvalued by the market.

They spend a massive amount on R&D since it correspond to 91% of their earnings in this case that does however come from them not being able to push out their products as they should do.

They pay a poor dividend in the size of 2.2% which correspond to 50% of their earnings so I doubt they will increase it any further for the time being.

Conclusion: Graham says no to Deere and so do I at this moment. The P/E and P/B is awful and only the ROE is what looks ok but they are massively leveraged with debt on the other hand. My problem right now is that due to strong dollar and a no clue why share price increase as of late I have a fairly nice profit on Deere that I could claim. Berkshire and Mr. Buffett have even walked away. If Deere would have even been close to "normal" earnings and Mr. Market would value Deere at P/E 22 then I would have walked away. Earnings are at the moment pretty much half of what they had in 2012, 2013 and 2014 and for this reason I decide not to sell my shares and I will remain as a shareholder. I will however not buy any more shares at this moment.

Deere annual report 2016

To read the report in full on the Deere home page then please click here, to check out the previous publication then please visit Deere annual report 2015 and to find out more regarding Deere then please visit analysis of Deere 2015.

As can be seen in the financial statement below Deere have, if one includes 2016, had two really bad years. The sales keeps dropping and dropping and have gone from 35 billion USD in 2013 to this very poor of an excuse results of 23 billion USD. So sales down by over -30% in 4 years. The earnings are down to 1.5 billion USD and two years ago that value was more than doubled and it was better yet in 2013. No, Deere is not doing well. Even though they have kept buying back shares, which I certainly hope they have stopped doing now, they simply cannot buy back in quickly enough to cover for the strong earnings crash that took place.

Conclusion: Deere is having a tough time. Berkshire Hathaway have decided to step out of Deere which is understandable considering that there is negative correlation between result and share price and they most likely walked away with an annual of 20+% when they sold it. I will remain shareholder for the time being but I am annoyed that they do not destroy their shares but keep them in the books.

Analysis of DBAG 2017

Company: Deutsche Beteiligungs AG 

ISIN DE000A1TNUT7 | WKN A1TNUT 

Business: A German private equity company. Their focus lies with the management buy out of small and medium sized companies that have excellent products. To see their full company portfolio then please click here. Five new investments joined during 2015.

Active: Germany, and surroundings. Companies are sometimes more globally oriented. 

P/E: 10.2

Here you can find the previous analysis of DBAG 2016.

The P/E for DBAG is good today with its 10.2 and the P/B is also good with 1.4 which gives a very clear by signal from Graham. There is not need to bring up earnings to sales but the ROE is up at almost 14% which is so, so. The book to debt ratio is great with over 10.

Their revenue is going up and down and last year, 2016, was a good year but so was 2011 so the growth rate in these five years have not been impressive with its 2% and this then gives us a motivated P/E of 10 to 12 which means that DBAG is fairly valued on the market today.

They pay an acceptable dividend in the size of 3.5% which correspond to 36% of their earnings so hopefully something that they will be able to keep up.

Conclusion: Graham says yes and I do not. The P/E and P/B is good and so is the dividend that the pay but they have started to get close to full valuation and for this reason I think there will be better moments to step in as a shareholder, such as after the dividend payment. This said I will still remain as a shareholder in DBAG.

DBAG annual report 2016

As always please make sure that you are viable to read the report that can be found in full here. To read the previous summary please go to DBAG annual report 2015 or why not visit the analysis of DBAG 2016.

As can be seen in the report below DBAG is doing well. Their investments are thriving and they are selling them off at good valuations when the opportunity appears. The net income is doubled compared to 2015 and the EPS was up at 3.65 €. They used to have a very low dividend payment that was each year increased according to their earnings but now they have stopped this and they will only pay out 1.2 € which is still pretty ok.

Conclusion: DBAG is doing very well selling off their holdings to for instance Tesla. This year appears to be an excellent year for DBAG with massive EPS increases even though they are handing out a lot of shares. I will remain as shareholder in DBAG.

Dividend from Deere: February 2017

Deere decided to pay out a dividend to me and for my 30 shares I received 16.62 € and I had to pay 2.49 € in taxes which left me with 14.13 €.

To find out more about Deere then please visit analysis of Deere 2015.

To see my yearly dividend earnings then please visit the Stock Dividends page that will shortly be updated.