Deere & Company (NYSE:DE)'s stock price experienced a massive run-up starting in 2006 and lasting until late 2007. Then it crashed to 1/3 of its high during the depths of the financial crisis. However, the stock price has since regained steam and currently trades near an all-time high. So it's worth asking whether Deere still has room to run or whether the stock is too risky to own at this point.

Keeping pace with the competition

Deere's strong brand and efficient production of agricultural and forestry machinery allows it to compete effectively against both its largest rivals and its smaller niche competitors. For example, Deere's $36 billion in sales is less than Caterpillar Inc. (NYSE:CAT)'s $60 billion in sales and more than Terex Corporation (NYSE:TEX)'s $6.5 billion in sales. Yet Deere regularly produces higher margins than both companies.

Deere's outperformance is due in part to its product mix, but primarily to its superior pricing power as a result of its strong brand name. Deere's products are regarded as more dependable and durable than the competition's.

Despite Deere's superior pricing power, Caterpillar remains the largest manufacturer of heavy construction equipment in the world. Due to its vast scale and distribution superiority, it is unlikely to ever give up its position as the biggest company in the industry. However, Caterpillar took a lot bigger hit to earnings in 2009 than did Deere, showing that even superior size could not protect it from a weakening in demand. However, the company is back on track to earn record profits and it should continue a steady growth in sales for the foreseeable future. However, the stock is fairly valued at $63.5 billion.

Terex Corporation (NYSE:TEX) is much smaller than Deere and Caterpillar. Its market capitalization is only $3 billion, compared to $36 billion for Deere and $63 billion for Caterpillar. The company is unique in that it sells all of its products directly to customers instead of building out a dealership network. However, the company has struggled mightily since the recession, and only recently eked out its first profit since the downturn. The words 'small' and 'manufacturer' generally do not go well together; Terex has made it work during good years, but the bad years reveal its flaws. As a result of its small size, Terex's ROIC significantly lags that of Deere and Caterpillar.

Future looks bright

Deere's main opportunity is to supply the BRICS -- Brazil, Russia, India, China, and South Africa -- with state-of-the-art agricultural technology, the likes of which have yet to gain widespread adoption in many parts of these countries. Russia is particularly in need of more advanced equipment; the agricultural segment of the Russian economy significantly lags the sophistication of modern western economies.