Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Can Deere & Company (DE) Sustain Its Debt?

Deere & Company (NYSE:DE could be one of the best stocks to own for the next 100 years. The company is involved in the manufacture and production of food and cutting of timber, two services that people will always need.  Even if we stop eating food and chop down all of the trees in the world, I believe the company would still find another market to supply.

Deere & Company (NYSE:DE)That said, there is one thing that worries me about John Deere: the company’s rapidly growing pile of debt.

$US Millions 2008 2009 2010 2011 2012
Net debt 19,230 19,707 20,331 22,155 26,298
Long-term debt 13,899 17,392 16,815 16,960 22,453
Cash & cash equivalents 3,189 4,844 4,019 4,435 6,123

Deere’s long-term debt has grown 60% over five years. In addition, net debt has grown 37%, which is surprising considering how profitable Deere has been in the past few years.

Should I be worried about this growing debt?Catterpillar Net Debt

Compared to Deere’s closest competitor Caterpillar Inc. (NYSE:CAT) , Deere’s net debt is growing rapidly. Joy Global Inc. (NYSE:JOY) , my favorite equipment manufacture on the market, has also increased its debt, but as I have covered below it’s the net debt to EBITDA ratio that reveals the most about these firms.Deere Net Debt

This chart, constructed from the table above, highlights the rising debt of Deere. Deere’s cash pile is growing as well; however, it is not growing faster than debt, resulting in a rapidly rising net debt position as the company borrows money faster than it can pay it off.Catterpillar Net Debt 1

Caterpillar’s debt profile shows a different picture. While Deere & Company (NYSE:DE) is increasing net debt faster than its cash balance, CAT’s net debt pile is falling as the company reduces short term debt and improves its cash position.Joy Global Net Debt

In comparison to both CAT and DE, JOY has a great debt profile. The company had a net cash balance of $800 million 2010 and this strong cash balance has offset the majority of the company’s debt over the past five years. However, after recent acquisitions JOY’s net debt has grown leaving the company with a smaller cash balance and a $1 billion net debt position.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.