Intrinsic value of Caterpillar - CAT

Previous Close

$103.93

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$103.93

 
Intrinsic value premium content
 
Up/down potential premium content
 
Rating premium content
 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CAT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 60.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -18.03
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  38,537
  39,308
  40,212
  41,245
  42,405
  43,691
  45,102
  46,638
  48,300
  50,092
  52,014
  54,071
  56,265
  58,602
  61,085
  63,720
  66,512
  69,468
  72,594
  75,897
  79,384
  83,064
  86,944
  91,035
  95,344
  99,883
  104,662
  109,693
  114,986
  120,555
  126,412
Variable operating expenses, $m
 
  24,044
  24,583
  25,200
  25,892
  26,658
  27,500
  28,416
  29,407
  30,476
  31,622
  32,247
  33,555
  34,949
  36,430
  38,001
  39,667
  41,429
  43,294
  45,263
  47,343
  49,537
  51,852
  54,291
  56,861
  59,568
  62,418
  65,418
  68,575
  71,896
  75,390
Fixed operating expenses, $m
 
  15,181
  15,561
  15,950
  16,349
  16,757
  17,176
  17,606
  18,046
  18,497
  18,959
  19,433
  19,919
  20,417
  20,928
  21,451
  21,987
  22,537
  23,100
  23,678
  24,270
  24,876
  25,498
  26,136
  26,789
  27,459
  28,145
  28,849
  29,570
  30,309
  31,067
Total operating expenses, $m
  38,039
  39,225
  40,144
  41,150
  42,241
  43,415
  44,676
  46,022
  47,453
  48,973
  50,581
  51,680
  53,474
  55,366
  57,358
  59,452
  61,654
  63,966
  66,394
  68,941
  71,613
  74,413
  77,350
  80,427
  83,650
  87,027
  90,563
  94,267
  98,145
  102,205
  106,457
Operating income, $m
  498
  82
  68
  96
  165
  275
  426
  616
  847
  1,119
  1,433
  2,391
  2,791
  3,236
  3,728
  4,268
  4,859
  5,502
  6,200
  6,956
  7,772
  8,650
  9,594
  10,608
  11,694
  12,856
  14,099
  15,425
  16,841
  18,349
  19,956
EBITDA, $m
  3,532
  2,989
  3,028
  3,116
  3,254
  3,440
  3,673
  3,953
  4,282
  4,659
  5,085
  5,562
  6,090
  6,672
  7,310
  8,005
  8,759
  9,576
  10,457
  11,407
  12,427
  13,521
  14,693
  15,946
  17,285
  18,714
  20,236
  21,858
  23,584
  25,419
  27,369
Interest expense (income), $m
  1,075
  1,037
  1,072
  1,117
  1,168
  1,225
  1,288
  1,358
  1,434
  1,516
  1,604
  1,699
  1,801
  1,909
  2,024
  2,147
  2,277
  2,414
  2,560
  2,715
  2,878
  3,050
  3,231
  3,423
  3,625
  3,837
  4,061
  4,297
  4,545
  4,806
  5,081
Earnings before tax, $m
  139
  -954
  -1,005
  -1,021
  -1,003
  -950
  -863
  -742
  -587
  -397
  -172
  692
  990
  1,327
  1,703
  2,121
  2,582
  3,088
  3,640
  4,241
  4,894
  5,600
  6,363
  7,185
  8,069
  9,019
  10,038
  11,129
  12,296
  13,543
  14,874
Tax expense, $m
  192
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  187
  267
  358
  460
  573
  697
  834
  983
  1,145
  1,321
  1,512
  1,718
  1,940
  2,179
  2,435
  2,710
  3,005
  3,320
  3,657
  4,016
Net income, $m
  -67
  -954
  -1,005
  -1,021
  -1,003
  -950
  -863
  -742
  -587
  -397
  -172
  505
  723
  969
  1,244
  1,549
  1,885
  2,254
  2,657
  3,096
  3,573
  4,088
  4,645
  5,245
  5,891
  6,584
  7,327
  8,124
  8,976
  9,886
  10,858

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7,168
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  74,704
  68,840
  70,423
  72,233
  74,265
  76,517
  78,987
  81,677
  84,589
  87,726
  91,093
  94,695
  98,538
  102,630
  106,979
  111,594
  116,484
  121,661
  127,135
  132,919
  139,026
  145,471
  152,267
  159,430
  166,978
  174,927
  183,297
  192,106
  201,377
  211,129
  221,387
Adjusted assets (=assets-cash), $m
  67,536
  68,840
  70,423
  72,233
  74,265
  76,517
  78,987
  81,677
  84,589
  87,726
  91,093
  94,695
  98,538
  102,630
  106,979
  111,594
  116,484
  121,661
  127,135
  132,919
  139,026
  145,471
  152,267
  159,430
  166,978
  174,927
  183,297
  192,106
  201,377
  211,129
  221,387
Revenue / Adjusted assets
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
Average production assets, $m
  18,291
  18,671
  19,101
  19,591
  20,143
  20,753
  21,423
  22,153
  22,943
  23,794
  24,707
  25,684
  26,726
  27,836
  29,015
  30,267
  31,593
  32,997
  34,482
  36,051
  37,707
  39,455
  41,299
  43,241
  45,289
  47,445
  49,715
  52,104
  54,618
  57,264
  60,046
Working capital, $m
  5,835
  12,893
  13,189
  13,528
  13,909
  14,331
  14,793
  15,297
  15,843
  16,430
  17,061
  17,735
  18,455
  19,221
  20,036
  20,900
  21,816
  22,786
  23,811
  24,894
  26,038
  27,245
  28,518
  29,859
  31,273
  32,762
  34,329
  35,979
  37,715
  39,542
  41,463
Total debt, $m
  36,783
  30,632
  31,907
  33,364
  35,000
  36,812
  38,801
  40,966
  43,310
  45,836
  48,546
  51,445
  54,539
  57,833
  61,334
  65,049
  68,986
  73,153
  77,560
  82,216
  87,132
  92,320
  97,791
  103,557
  109,633
  116,032
  122,770
  129,862
  137,324
  145,175
  153,433
Total liabilities, $m
  61,567
  55,416
  56,691
  58,148
  59,784
  61,596
  63,585
  65,750
  68,094
  70,620
  73,330
  76,229
  79,323
  82,617
  86,118
  89,833
  93,770
  97,937
  102,344
  107,000
  111,916
  117,104
  122,575
  128,341
  134,417
  140,816
  147,554
  154,646
  162,108
  169,959
  178,217
Total equity, $m
  13,137
  13,424
  13,733
  14,086
  14,482
  14,921
  15,402
  15,927
  16,495
  17,107
  17,763
  18,465
  19,215
  20,013
  20,861
  21,761
  22,714
  23,724
  24,791
  25,919
  27,110
  28,367
  29,692
  31,089
  32,561
  34,111
  35,743
  37,461
  39,268
  41,170
  43,171
Total liabilities and equity, $m
  74,704
  68,840
  70,424
  72,234
  74,266
  76,517
  78,987
  81,677
  84,589
  87,727
  91,093
  94,694
  98,538
  102,630
  106,979
  111,594
  116,484
  121,661
  127,135
  132,919
  139,026
  145,471
  152,267
  159,430
  166,978
  174,927
  183,297
  192,107
  201,376
  211,129
  221,388
Debt-to-equity ratio
  2.800
  2.280
  2.320
  2.370
  2.420
  2.470
  2.520
  2.570
  2.630
  2.680
  2.730
  2.790
  2.840
  2.890
  2.940
  2.990
  3.040
  3.080
  3.130
  3.170
  3.210
  3.250
  3.290
  3.330
  3.370
  3.400
  3.430
  3.470
  3.500
  3.530
  3.550
Adjusted equity ratio
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -67
  -954
  -1,005
  -1,021
  -1,003
  -950
  -863
  -742
  -587
  -397
  -172
  505
  723
  969
  1,244
  1,549
  1,885
  2,254
  2,657
  3,096
  3,573
  4,088
  4,645
  5,245
  5,891
  6,584
  7,327
  8,124
  8,976
  9,886
  10,858
Depreciation, amort., depletion, $m
  3,034
  2,907
  2,960
  3,021
  3,089
  3,164
  3,247
  3,337
  3,434
  3,539
  3,652
  3,171
  3,299
  3,437
  3,582
  3,737
  3,900
  4,074
  4,257
  4,451
  4,655
  4,871
  5,099
  5,338
  5,591
  5,857
  6,138
  6,433
  6,743
  7,070
  7,413
Funds from operations, $m
  6,236
  1,953
  1,956
  2,000
  2,086
  2,215
  2,384
  2,595
  2,848
  3,143
  3,481
  3,676
  4,022
  4,405
  4,826
  5,285
  5,785
  6,328
  6,914
  7,547
  8,228
  8,959
  9,744
  10,584
  11,482
  12,441
  13,465
  14,556
  15,719
  16,956
  18,271
Change in working capital, $m
  628
  253
  297
  339
  381
  422
  463
  504
  545
  588
  631
  675
  720
  766
  814
  864
  916
  970
  1,025
  1,083
  1,144
  1,207
  1,273
  1,342
  1,414
  1,489
  1,568
  1,650
  1,736
  1,827
  1,921
Cash from operations, $m
  5,608
  1,080
  1,659
  1,661
  1,706
  1,793
  1,922
  2,091
  2,303
  2,555
  2,850
  3,001
  3,302
  3,639
  4,011
  4,421
  4,869
  5,358
  5,889
  6,464
  7,084
  7,752
  8,471
  9,242
  10,068
  10,953
  11,898
  12,906
  13,983
  15,129
  16,350
Maintenance CAPEX, $m
  0
  -2,258
  -2,305
  -2,358
  -2,419
  -2,487
  -2,562
  -2,645
  -2,735
  -2,832
  -2,937
  -3,050
  -3,171
  -3,299
  -3,437
  -3,582
  -3,737
  -3,900
  -4,074
  -4,257
  -4,451
  -4,655
  -4,871
  -5,099
  -5,338
  -5,591
  -5,857
  -6,138
  -6,433
  -6,743
  -7,070
New CAPEX, $m
  -2,928
  -380
  -429
  -491
  -551
  -611
  -670
  -730
  -790
  -851
  -913
  -977
  -1,042
  -1,110
  -1,180
  -1,252
  -1,326
  -1,404
  -1,485
  -1,569
  -1,656
  -1,748
  -1,843
  -1,943
  -2,047
  -2,156
  -2,270
  -2,389
  -2,514
  -2,645
  -2,782
Cash from investing activities, $m
  -1,760
  -2,638
  -2,734
  -2,849
  -2,970
  -3,098
  -3,232
  -3,375
  -3,525
  -3,683
  -3,850
  -4,027
  -4,213
  -4,409
  -4,617
  -4,834
  -5,063
  -5,304
  -5,559
  -5,826
  -6,107
  -6,403
  -6,714
  -7,042
  -7,385
  -7,747
  -8,127
  -8,527
  -8,947
  -9,388
  -9,852
Free cash flow, $m
  3,848
  -1,558
  -1,076
  -1,188
  -1,264
  -1,305
  -1,311
  -1,283
  -1,222
  -1,128
  -1,001
  -1,026
  -911
  -771
  -605
  -413
  -194
  54
  330
  638
  977
  1,349
  1,757
  2,201
  2,683
  3,205
  3,770
  4,380
  5,036
  5,741
  6,498
Issuance/(repayment) of debt, $m
  -1,310
  1,017
  1,275
  1,457
  1,636
  1,812
  1,989
  2,165
  2,344
  2,525
  2,710
  2,899
  3,094
  3,294
  3,501
  3,715
  3,937
  4,167
  4,407
  4,656
  4,916
  5,188
  5,471
  5,767
  6,076
  6,399
  6,738
  7,092
  7,463
  7,851
  8,258
Issuance/(repurchase) of shares, $m
  -23
  828
  110
  84
  25
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,313
  1,845
  1,385
  1,541
  1,661
  1,812
  1,989
  2,165
  2,344
  2,525
  2,710
  2,899
  3,094
  3,294
  3,501
  3,715
  3,937
  4,167
  4,407
  4,656
  4,916
  5,188
  5,471
  5,767
  6,076
  6,399
  6,738
  7,092
  7,463
  7,851
  8,258
Total cash flow (excl. dividends), $m
  2,507
  -541
  199
  269
  372
  508
  678
  882
  1,122
  1,397
  1,710
  1,873
  2,183
  2,523
  2,896
  3,302
  3,743
  4,221
  4,737
  5,294
  5,893
  6,537
  7,227
  7,967
  8,759
  9,604
  10,508
  11,471
  12,498
  13,592
  14,756
Retained Cash Flow (-), $m
  1,672
  -287
  -309
  -353
  -396
  -439
  -482
  -525
  -568
  -612
  -657
  -702
  -749
  -798
  -848
  -900
  -954
  -1,009
  -1,067
  -1,128
  -1,191
  -1,257
  -1,325
  -1,397
  -1,472
  -1,550
  -1,632
  -1,718
  -1,808
  -1,902
  -2,000
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  0
  0
  0
  69
  196
  358
  554
  786
  1,053
  1,171
  1,434
  1,726
  2,048
  2,402
  2,789
  3,212
  3,670
  4,166
  4,702
  5,280
  5,902
  6,570
  7,287
  8,054
  8,876
  9,753
  10,690
  11,690
  12,756
Discount rate, %
 
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
 
  0
  0
  0
  0
  41
  102
  160
  211
  252
  281
  256
  253
  241
  223
  200
  174
  148
  121
  97
  75
  56
  41
  29
  20
  13
  8
  5
  3
  2
  1
Current shareholders' claim on cash, %
  100
  98.6
  98.5
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3
  98.3

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives for heavy and general construction, rental, quarry, aggregate, mining, waste, material handling, oil and gas, power generation, marine, rail, and industrial markets. Its Construction Industries segment offers backhoe, compact, track-type, small and medium wheel, knuckleboom, and skid steer loaders; small and medium track-type, and site prep tractors; mini, wheel, forestry, small, medium, and large track excavators; and motorgraders, pipelayers, telehandlers, cold planers, asphalt pavers, compactors, road reclaimers, and wheel and track skidders and feller bunchers. The company’s Resource Industries segment provides electric rope and hydraulic shovel, landfill and soil compactor, dragline, large wheel loader, machinery component, track and rotary drill, electronics and control system, work tool, hard rock vehicle and continuous mining system, scoop and hauler, wheel tractor scraper, large track-type tractor, and wheel dozer products; longwall, highwall, and continuous miners; and mining, off-highway, and articulated trucks. Its Energy & Transportation segment offers reciprocating engine powered generator set and engine, integrated system, turbine, centrifugal gas compressor, diesel-electric locomotive and component, and other rail-related products and services. The company’s Financial Products segment offers finance for Caterpillar equipment, machinery, and engines, as well as dealers; property, casualty, life, accident, and health insurance; and insurance brokerage services, as well as purchases short-term trade receivables. Its All Other operating segments provides parts distribution and digital investments services. The company was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. The company was founded in 1925 and is headquartered in Peoria, Illinois.

FINANCIAL RATIOS  of  Caterpillar (CAT)

Valuation Ratios
P/E Ratio -909.8
Price to Sales 1.6
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 10.9
Price to Free Cash Flow 22.7
Growth Rates
Sales Growth Rate -18%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.2%
Cap. Spend. - 3 Yr. Gr. Rate -8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 173.7%
Total Debt to Equity 280%
Interest Coverage 1
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. 2.4%
Return On Total Capital -0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.9%
Return On Equity -0.5%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 26.5%
Gross Margin - 3 Yr. Avg. 27.1%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 13.5%
Operating Margin 1.3%
Oper. Margin - 3 Yr. Avg. 5.1%
Pre-Tax Margin 0.4%
Pre-Tax Margin - 3 Yr. Avg. 4.5%
Net Profit Margin -0.2%
Net Profit Margin - 3 Yr. Avg. 3.2%
Effective Tax Rate 138.1%
Eff/ Tax Rate - 3 Yr. Avg. 62.2%
Payout Ratio -2685.1%

CAT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CAT stock intrinsic value calculation we used $38537 million for the last fiscal year's total revenue generated by Caterpillar. The default revenue input number comes from 2016 income statement of Caterpillar. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CAT stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.1%, whose default value for CAT is calculated based on our internal credit rating of Caterpillar, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Caterpillar.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CAT stock the variable cost ratio is equal to 61.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14811 million in the base year in the intrinsic value calculation for CAT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Caterpillar.

Corporate tax rate of 27% is the nominal tax rate for Caterpillar. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CAT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CAT are equal to 47.5%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Caterpillar operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CAT is equal to 32.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $13137 million for Caterpillar - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 581.761 million for Caterpillar is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Caterpillar at the current share price and the inputted number of shares is $60.5 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
CMI Cummins 158.20 prem.  prem.
CNHI CNH Industrial 11.37 prem.  prem.
ASTE Astec Industri 54.24 prem.  prem.
GE General Electr 27.21 prem.  prem.
DE Deere 122.00 prem.  prem.
JOY Joy Global 28.18 prem.  prem.

COMPANY NEWS

▶ Caterpillar: Keep On Digging?   [Jun-28-17 09:43AM  Barrons.com]
▶ Top Ranked Momentum Stocks to Buy for June 26th   [Jun-26-17 07:19AM  Zacks]
▶ Stocks Open Tightly Mixed; This Bank Leads Dow, Cat Downgraded   [09:44AM  Investor's Business Daily]
▶ Caterpillar weighs down Dow at open   [09:38AM  CNBC Videos]
▶ Martin Marietta CFO to retire, to be replaced by Caterpillar vet   [Jun-22-17 06:05PM  American City Business Journals]
▶ Better Buy: Caterpillar Inc. vs. United Technologies   [Jun-20-17 04:42PM  Motley Fool]
▶ Tech Stocks Report Losses for the Week   [Jun-16-17 06:02PM  GuruFocus.com]
▶ Dow Jones Industrial Average And Dow Stocks: News And Analysis   [12:53PM  Investor's Business Daily]
▶ [$$] The Exporting Jobs Canard   [12:19AM  The Wall Street Journal]
▶ 5 Large Cap Stocks to Buy Now   [Jun-14-17 03:47PM  Zacks]
▶ Caterpillar Hikes Dividend 1.3%   [12:08PM  TheStreet.com]
▶ Caterpillar raises dividend by 1.3%   [10:16AM  MarketWatch]
▶ Why I'm Increasingly Bearish   [09:05AM  TheStreet.com]
▶ US Market Indexes Gain   [Jun-08-17 06:50PM  GuruFocus.com]
▶ Caterpillar Ramping Up Data Services Business   [Jun-06-17 06:01PM  The Wall Street Journal]
▶ 3 Stocks Set for Higher Highs   [04:35PM  Zacks]
▶ Farm Giant Deere Hits The Road With Big German Takeover   [Jun-01-17 04:34PM  Investor's Business Daily]
▶ U.S. companies sign billions in deals with Vietnam   [May-31-17 04:47PM  Reuters]
Stock chart of CAT Financial statements of CAT Annual reports of CAT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.