Is Caterpillar Inc (CAT) overvalued?
On Equity Rank's model estimate, CAT trades close to its fair value (3% above it). Caterpillar Inc (CAT) last closed at $558.63; the multi-method model fair value is $543.03.
| Price | Model fair value | Price vs model |
|---|---|---|
| $558.63 | $543.03 | 3% above |
What the answer rests on
- 2 of 8 valuation methods put CAT's value above its price and 6 put it below, so the methods mostly agree.
- To justify today's price, CAT's free cash flow would need to grow about 18.5% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 13.0% a year.
- CAT trades at 23.2 times its last year's earnings, against a median of 29.0 for 11 profitable Heavy Machinery companies.
- Over the past year the price sat below the model fair value on 0% of trading days. The gap ranged from 2% above to 179% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind CAT's fair value · What prices assume · Other companies