Here’s a riddle for you: If a business makes its profit from the agriculture boom, yet the majority of its products run on oil (and are therefore dependent on oil prices) does its stock go up…or down?

This is the conundrum of farm equipment behemoth Deere & Co. (DE).

With the booming worldwide demand for agricultural products, investors flocked to DE expecting significant revenue and profit growth (see, “Grow Enormous Profits This Earnings Season!“). Seems like a no-brainer, doesn’t it? After all, unprecedented global growth necessitated an expansion in farming and it seemed obvious that Deere & Co was poised to profit.

Then, something funny happened on the way to the farm. Oil prices suddenly shot through the roof in 2008. Investors who had bid shares of DE to nearly $100 were forced to answer the riddle themselves. Could DE continue its stock market ascent in the face of rising oil prices that could potentially choke the very growth that had made the company so attractive to speculators?

For the first six months of the year, the bulls held firm as DE maintained its lofty valuation. However, the cracks in the commodity fortress started to show this past May. With oil on its way to $150 per barrel, astute investors realized the dangers lurking in the shadows may evolve into the form of a worldwide recession and got out of town (see, “Are Soaring Oil Prices a Bubble Set to Pop?“). Shares of DE dropped approximately $30 from its highs.

So what happened?

Typically, when stocks exhibit this type of high volatility, speculators get nervous. Deere & Co. announced that profits rose by 7% in its most recent fiscal quarter. But higher costs and lower sales in its consumer division hampered results, causing DE to miss expectations by producing a profit of $1.32 as opposed to the estimates of $1.36.

3 Reasons Why Deere & Co Will Reap What It Sows

First, the company did produce revenue growth of 17% handily beating estimates. Clearly, farmers are enjoying huge cash flows from high commodity prices. With the extra cash on hand, it can be reasonably expected that they will use the money to upgrade their farm equipment, which puts a very hard floor on demand for DE products.

Second, if the world population and global economic growth continues as it has over the past year, DE can be expected to benefit for years to come (see also, “Top 5 Stocks for August“).

Third, oil prices dropping as a result of changed behavior would also be positive for the company. I’ve been writing a lot about conusmer changing their energy behaviors. Too see how turning down the air conditioning can increase profits in your portfolio, read “What Lower Oil Prices Mean for Your Portfolio“).

Shares trade for a relatively low valuation given the recent selling. At just over 10 times forward earnings, DE trades for a tad more than its profit growth rate. Given 17% revenue growth, I would say that Deere & Co. is a deal at these levels.

Use the selling today as a good time to establish a position in Deere & Co. (DE).