Caterpillar CAT
What does Caterpillar do?
Caterpillar is one of the world's largest manufacturers of construction and mining equipment. Its product range extends from excavators, wheel loaders, dozers and motor graders to dump trucks and mining equipment, as well as diesel engines, natural gas engines, industrial gas turbines and diesel-electric locomotives. Reporting is divided into segments including Construction Industries, Resource Industries and Energy & Transportation. These are complemented by the financing arm, Financial Products.
Revenue comes from new machine sales, spare parts and services, and financing and leasing. Customers include construction companies, mining groups, utilities, data center operators, oil and gas companies and dealers. Sales are made predominantly through a worldwide, closely integrated dealer network. Competitive advantages include a strong brand, a large installed base, a dense service and spare parts network, and the breadth of the offering. Competitors include Komatsu, Deere, Volvo Construction Equipment, Hitachi and Liebherr.
Score profile
Rank vs. Farm & Heavy Construction Machinery (14 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Caterpillar ranks among the best in the group Farm & Heavy Construction Machinery (9.6/10). On growth, the company ranks among the best in the group Farm & Heavy Construction Machinery (8.2/10). On valuation (higher = cheaper), the stock ranks below average in the group Farm & Heavy Construction Machinery (2.4/10). On financial strength, Caterpillar ranks below average in the group Farm & Heavy Construction Machinery (2.5/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 18.1x | 14.2x | better than 25 % |
| Trailing P/E | 22.9x | 22.4x | better than 46 % |
| PEG ratio | 1.0x | 0.9x | better than 42 % |
| EV/EBITDA | 18.4x | 11.5x | better than 18 % |
| Price/sales | 3.4x | 0.9x | better than 11 % |
| Price/book | 12.5x | 1.9x | better than 4 % |
| Revenue growth | 17.3% | 5.1% | better than 75 % |
| Earnings growth | 46.1% | 1.0% | better than 89 % |
| Gross margin | 29.5% | 25.1% | better than 96 % |
| Operating margin | 20.2% | 7.4% | better than 96 % |
| Net margin | 15.2% | 4.8% | better than 96 % |
| Return on equity | 56.1% | 11.7% | better than 96 % |
| Debt/equity | 210.4% | 68.8% | better than 18 % |
| Current ratio | 1.4x | 1.9x | better than 32 % |
| Free cash flow yield | 1.5% | 3.2% | better than 25 % |
| Dividend yield | 1.1% | 1.2% | – |
| Payout ratio | 24.2% | 29.2% | – |
| Beta | 1.64 | 1.19 | – |
Valuation: what is Caterpillar worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Caterpillar a model range of 328.75 USD to 458.81 USD per share.
26 analysts, average rating “Buy”, average price target 823.41 USD (+40.9%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Demand depends on construction and infrastructure investment and on the general economic cycle in the main regions of the world.
- Commodity prices influence the willingness of mining and oil and gas companies to invest, and therefore sales of large machinery and engines.
- The high-margin service and spare parts business on the installed base stabilizes revenue and earnings across the cycle.
Risks
- The business is highly cyclical, so economic downturns or commodity price declines can noticeably weigh on sales and plant utilization.
- Tariffs, trade conflicts and geopolitical tensions can affect supply chains, costs and access to important sales markets.
- Fluctuating commodity and component prices as well as currency effects can weigh on margins, and customer financing also carries credit risk.
What to look for with Caterpillar
The operating margin is particularly informative because it shows how well Caterpillar manages pricing power and cost control across the economic cycle.