CAT
Caterpillar Inc.
$725.24
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 60.5% above fair value
You pay
$725.24
Bear
$376.60
Fair
$451.92
Bull
$527.24
Bear
$376.60
-48.1%
$18.83 × 20x
Fair
$451.92
-37.7%
$18.83 × 24x
Bull
$527.24
-27.3%
$18.83 × 28x
Adjust Assumptions
24.0x
18.83$
Key Value Driver
Through-cycle normalized EPS ($18.83)
Implied Market Multiple
38.5x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (57 analysts)
$974.50
Divergence from AlphaVal
54%
Summary
Using 7-year normalized EPS of $18.83 at a 24x cycle multiple, the base-case value is $451.92 per share. P/TBV cross-check: 21.2x.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 21.2x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $974.50 (from 57 analysts). Our estimate is 54% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing