Attractive PE Ratio
Reasonable Price to Sales Ratio
Strong Return on Equity
Healthy Profit Margins
Strong Interest Coverage
Decent Current Ratio
Strong Financial Performance
Robust Free Cash Flow
Diverse Market Presence
Growth in Energy and Transportation
Innovation and Sustainability Initiatives
High PB Ratio
High Debt to Equity Ratio
Low Cash Ratio
Declining Sales Volume
Anticipated Sales Decline in 2025
Ongoing Economic Challenges
Caterpillar demonstrates strong business quality through solid financial performance, robust cash flow, and a diverse market presence, although it faces challenges with declining sales volume. Future prospects are mixed, with growth anticipated in certain sectors, but overall sales are expected to decline slightly in 2025 amid ongoing economic challenges.
Analysis Date: January 30, 2025
Last Updated: March 11, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$858.10
Current Market Price: $284.35
IV/P Ratio: 3.02x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
67.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for CAT
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (12.93)
P/B ratio ≤ 1.5 (7.16)
Current ratio ≥ 2.0 (1.42x)
Long-term debt < Net current assets (2.04x)
Margin of safety (67.0%)
CAT does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
CAT's return on equity of 58.61% demonstrates impressive profitability and effective management of shareholder equity.
With a net profit margin of 16.65%, CAT shows strong profitability, indicating effective cost management and robust sales performance.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
58.61%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
3.18%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
36.06%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
16.65%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
An interest coverage ratio of 26.02 indicates that CAT can comfortably meet its interest obligations, suggesting strong financial health.
With a current ratio of 1.42, CAT maintains adequate liquidity to cover its short-term liabilities.
The debt to equity ratio of 1.97 indicates a high level of leverage, which may pose risks in a downturn or if interest rates rise.
A cash ratio of 0.21 suggests that CAT has limited cash available to cover its current liabilities, which may impact liquidity in crisis situations.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
1.97x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
1.42x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
Caterpillar achieved record adjusted profit per share of $21.90 in 2024, reflecting a 3% increase over the previous year. The adjusted operating profit margin of 20.7% exceeded the top end of the target range, showcasing effective cost management and operational efficiency.
Caterpillar generated $9.4 billion in ME&T free cash flow, near the top of its target range, allowing for significant capital returns to shareholders through dividends and share repurchases.
The company benefits from a diverse range of end markets, reducing dependency on any single sector. Services revenue also grew by 4% to a record level of $24 billion, indicating a successful shift towards service-oriented offerings.
Sales and revenues decreased by 5% in Q4 and 3% for the full year, primarily due to lower sales volume and unfavorable product mix. This decline raises concerns about demand in key sectors.
Expected continued strength in energy and transportation sectors, particularly in power generation, with significant investments aimed at increasing capacity for large engines.
Caterpillar is heavily investing in R&D, with over $30 billion spent in the last 20 years. The company is introducing sustainable technologies, such as electrified machinery, which positions it well for future growth.
Sales and revenues for 2025 are expected to be slightly lower than in 2024, with anticipated declines in construction industries and resource industries, despite growth in services.
Weak economic conditions are anticipated in key regions such as EAME and Asia Pacific, which could hinder growth in those markets.