NEW YORK (TheStreet) -- Going against the grain as an investor can sometimes be rewarding -- if you've placed a bet on the right stock. But doing so just for the sake of being contrarian can hurt you.
Although Deere & Co. (DE), the largest maker of farm equipment in the U.S., has become an unloved name, now's not the time to run towards trouble on the idea that the market has gotten this story wrong. So ahead of the company's fiscal second-quarter earnings results Friday, resist temptation: Leave Deere alone and move on to better investment prospects.
There's no question that Deere -- at around $89 per share -- looks incredibly cheap. It's trading at just 11 times last year's earnings of $8.63 per share. Compared to the S&P 500, which trades at an average P/E of 21, it would seem there's considerable potential in Deere. But some cheap stocks are cheap with good reason.
On a forward-looking basis, Deere is -- at best -- fairly valued, assuming it earn $5.31 per share as expected for 2015. That would put the P/E at around 17, which is in line with the broader market. And even when projecting out to fiscal year 2016, the shares are still valued at 17 times earnings.
Again, while that's consistent with the rest of the S&P 500, it also calls for a year-over-year earnings declined of 1.6%, assuming the company does earn $5.22 per share.
So the question is, where's the value?