Deep Dive Into Caterpillar's Fundamentals (CAT)

Caterpillar shares moved 8.7% over the last 52 weeks, with a high of $245.05 and a low of $160.6. During this time, the stock underperformed the S&P 500 index by 27.4%. As of January 2022, the company's 50-day average price is $229.0. Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The large-cap Industrials company has 107,700 full time employees and is based in Irving, TX. Caterpillar has returned a 1.9% dividend yield over the last 12 months.

Strong Cash Flows at the Expense of a Highly Leveraged Balance Sheet:

2019-12-31 2020-12-31 2021-12-31
Revenue (MM) $53,800 $41,748 $50,971
Revenue Growth n/a -22.4% 22.09%
Gross Margins 30.5% 28.9% 29.4%
Gross Margins Growth n/a -5.25% 1.73%
Operating Margins 15.4% 10.9% 13.5%
Operating Margins Growth n/a -29.22% 23.85%
Earnings Per Share $10.74 $5.46 $11.83
EPS Growth n/a -49.16% 116.67%
Free Cash Flow (MM) $4,243 $4,212 $4,726
FCF Growth n/a -0.73% 12.2%
Capital Expenditures (MM) -$2,669 -$2,115 -$2,472
Net Debt / EBITDA 3.54 5.31 2.65

Caterpillar Is Overpriced:

Compared to the Industrials sector's average of 21.46, Caterpillar has a trailing twelve month price to earnings (P/E) ratio of 17.5 and, based on its EPS guidance of 15.18, an expected P/E ratio of 15.8.

The firm's price to earnings growth (PEG) is 1.33, which shows that the market is fairly valuing the company in terms of its expected rate of earnings growth.

Caterpillar's price to book (P/B) ratio is 8.0 compared to its sector average of 3.7. The company is likley overvalued in terms of its net tangible assets. The company's shares are currently trading 202.6% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * 3-year average EPS * book value per share) = √(22.5 * 9.34 * 29.959) = $79.35

Caterpillar Is the Subject of Mixed Market Indicators:

24 analysts are following Caterpillar and have set target prices ranging from $175 to $285 per share. On average, they have given the company a rating of hold. At the current price of $240.09, CAT is trading 3.11% away from its average analyst target price of $232.84 per share, implying an analyst consensus of little upside potential for the stock.

The company has a very low short interest since 1.7% of the company's shares are tied to short positions. Institutions own 70.8% of Caterpillar's shares, while the insider ownership rate stands at 0.22%. The biggest shareholder is the Vanguard Group, Inc. with a 9% stake in the company worth approximately $11,662,234,613.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.