ValueWalk

Caterpillar Inc. (CAT) Fundamental Valuation Report

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Valuation Summary:

Caterpillar $153.75 (USD) Close Price as of 06/03/2018

Based on the analysis conducted in this report, Caterpillar, (CAT:NYS) is found to be  Undervalued.

Company Caterpillar
Symbol:Exchange CAT:NYS
Industry Industrials:Farm & Construction Machinery
Close Price/Date $153.75 (USD) 06/03/2018
Weighted Average Valuation $174.51 (USD)
Summary CAT:NYS is found to be  Undervalued by 13.5% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $186.50 (USD)
(in order of importance) Discounted Cash Flow: $175.16 (USD)
Comparables: $137.26 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Undervalued on a Cash Flow Valuation basis
Comparable Company Basis: Overvalued on a Comparable Valuation basis
Asset Basis: Overvalued on an Asset Valuation basis

Valuation Details

Caterpillar Valuations

We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for CAT:NYS

Using a discounted cash flow model we generated an intrinsic value of $175.16 (USD) for CAT:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

CAT:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $175.16 1% 5% 1% 5%
WACC (or Ke) 8.17 $232.98 $136.09
Terminal Growth Rate 3.00 $139.97 $227.20
Tax Rate 0.40 $193.12 $157.19
Cash Flow 12,915,376,000 $163.83 $186.48
Capital Expenditures -864,600,000 $174.36 $175.95
Long Term Debt 37,110,000,000 $178.26 $172.05

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $137.26 (USD) for CAT:NYS. We also generated a valuation of $119.29 (USD) using other metrics and comparables. The comparable companies were Deere (DE:NYS)

Multiples


Using a multiples approach we generated a valuation of  $93.08 (USD) for CAT:NYS

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  CAT:NYS for the last 10 years was  3.28

We ran the Adjusted Book Value for  CAT:NYS and generated a book value of  $22.92 (USD) By multiplying these we get an adjusted valuation of  $75.17 (USD)

Analyst Data

In the Stockcalc database there are 6 analysts that provide a valuation for CAT:NYS. The 6 analysts have a concensus valuation for CAT:NYS for 2018 of $186.50 (USD).

CAT:NYS Caterpillar

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
5 2 0 4.1250 Outperform 2018-3-5

Current Price: not available

 

Company Overview (CAT:NYS USD)

Price 153.75
Range 151.67 - 154.98
52 week 91.39 - 170.89
Open 152.64
Vol / Avg. 5.75M/3.58M
Mkt cap 91.47B
P/E 122.02
Div/yield 3.12/0.02
EPS 1.26
Shares 594.93M
Beta 1.76

Detailed Company Description

Caterpillar Inc caters to the farming industry in the United States. It manufactures construction & mining equipment, diesel & natural gas engines, industrial gas turbines and diesel-electric locomotives.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.