Market Inference Overview -- CAT Stock

Caterpillar logged a -1.9% change during today's afternoon session, and is now trading at a price of $315.87 per share.

Caterpillar returned gains of 30.0% last year, with its stock price reaching a high of $334.87 and a low of $204.04. Over the same period, the stock outperformed the S&P 500 index by 7.8%. More recently, the company's 50-day average price was $286.36. Caterpillar Inc. manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives in the United States and internationally. The large-cap Industrials company is based in Irving, TX. Caterpillar has offered a 1.6% dividend yield over the last 12 months.

Exceptional EPS Growth Obtained Primarily Through Share Buybacks:

2018 2019 2020 2021 2022 2023
Revenue (MM) $54,722 $53,800 $41,748 $50,971 $59,427 $66,587
Revenue Growth n/a -1.68% -22.4% 22.09% 16.59% 12.05%
Gross Margins 32% 32% 30% 30% 30% 35%
Operating Margins 15% 15% 11% 13% 13% 17%
Net Margins 11% 11% 7% 13% 11% 14%
Net Income (MM) $6,148 $6,094 $3,003 $6,493 $6,704 $9,113
Net Interest Expense (MM) -$67 -$57 -$44 $1,814 $1,291 $890
Depreciation & Amort. (MM) $2,766 $2,577 $2,432 $2,352 $2,219 $2,157
Earnings Per Share $0.0 $0.0 $0.0 $0.0 $0.0 $17.64
EPS Growth n/a n/a n/a n/a n/a n/a
Diluted Shares (MM) 599,000,000,000 568,000,000,000 549,000,000,000 549,000,000,000 530,000,000,000 513
Free Cash Flow (MM) $5,282 $5,856 $5,349 $6,105 $6,470 $10,132
Capital Expenditures (MM) $1,276 $1,056 $978 $1,093 $1,296 $1,489
Current Ratio 1.37 1.47 1.53 1.46 1.39 1.45

Caterpillar has rapidly growing revenues and increasing reinvestment in the business, generally positive cash flows, and decent operating margins with a stable trend. However, the firm has exceptional EPS growth obtained primarily through share buybacks. Finally, we note that Caterpillar has similar gross margins to its peers and just enough current assets to cover current liabilities, as shown by its current ratio of 1.45.

Caterpillar Is Fairly Priced to Earnings but Overpriced Compared to Its Book Value:

Caterpillar has a trailing twelve month P/E ratio of 14.2, compared to an average of 22.19 for the Industrials sector. Based on its EPS guidance of $22.17, the company has a forward P/E ratio of 12.9. The inf% compound average growth rate of Caterpillar's historical and projected earnings per share yields a PEG ratio of 0.0. This suggests that its shares are undervalued. Furthermore, Caterpillar is likely overvalued compared to the book value of its equity, since its P/B ratio of 8.17 is higher than the sector average of 4.06. Ultimately, Caterpillar's strong cash flows, decent earnings multiple, and healthy debt levels factor towards it being fairly valued, its elevated P/B ratio notwithstanding.

Analysts Give Caterpillar an Average Rating of Hold:

The 21 analysts following Caterpillar have set target prices ranging from $175.0 to $395.0 per share, for an average of $303.24 with a hold rating. The company is trading 4.2% away from its average target price, indicating that there is an analyst consensus of little upside potential.

Caterpillar has a very low short interest because 1.8% of the company's shares are sold short. Institutions own 71.9% of the company's shares, and the insider ownership rate stands at 0.16%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $15,232,321,932.

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.