Yahoo Finance Is Caterpillar Inc. (NYSE:CAT) Potentially Undervalued?
Caterpillar Inc. (NYSE:CAT) saw a decent share price growth in the teens level on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Caterpillar’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Caterpillar
What Is Caterpillar Worth?
According to my valuation model, Caterpillar seems to be fairly priced at around 16% below my intrinsic value, which means if you buy Caterpillar today, you’d be paying a fair price for it. And if you believe that the stock is really worth $233.24, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Caterpillar has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of Caterpillar look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 21% over the next couple of years, the future seems bright for Caterpillar. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? CAT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on CAT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 2 warning signs for Caterpillar (1 makes us a bit uncomfortable!) that we believe deserve your full attention.
If you are no longer interested in Caterpillar, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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