Weekly valuations: Caterpillar (CAT)
In the midst of a bull market carried by tech stocks, we look at a blue chip company today: Caterpillar Inc.
A Fortune 100 corporation with revenue of $41Bn, the Deerfield, IL firm designs, develops, engineers, manufactures, markets, and sells machinery, engines, financial products, and insurance to customers via a worldwide dealer network. It is the world’s largest construction-equipment manufacturer.
In the past 12 months, CAT appreciated over 50% and reached a current market cap of $116Bn, but how can we justify this valuation with market data, let’s take a look.
Even as analysts consensus estimates envision Caterpillar outperforming most of its peers in both growth (e.g. 5.3% in 2023 vs peer median of 3.4%) and profitability (19.4% EBITDA margin and 11.9% Net Income margin by 2025, more than twice peers median on both metrics), a simple DCF yields a more conservative valuation of about $60Bn, almost half of today’s market cap.
Looking at trading multiples and precedent transactions extends the range into the mid $80Bn’s but nevertheless it appears that CAT is valued richly by the markets today. Share your thoughts with us or investigate our valuation work with the link below.
Weekly valuations: Caterpillar link to the valuation here
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