Intrinsic value of Caterpillar, Inc. - CAT

Previous Close

$119.38

  Intrinsic Value

$240.29

stock screener

  Rating & Target

str. buy

+101%

Previous close

$119.38

 
Intrinsic value

$240.29

 
Up/down potential

+101%

 
Rating

str. buy

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 0001), $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 68.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.45
  5.40
  5.36
  5.32
  5.29
Revenue, $m
  60,851
  67,289
  74,033
  81,080
  88,433
  96,092
  104,062
  112,352
  120,968
  129,922
  139,226
  148,897
  158,949
  169,401
  180,274
  191,589
  203,369
  215,641
  228,429
  241,764
  255,674
  270,193
  285,352
  301,188
  317,737
  335,038
  353,132
  372,061
  391,872
  412,610
Variable operating expenses, $m
  35,568
  39,245
  43,097
  47,122
  51,322
  55,696
  60,249
  64,983
  69,905
  75,019
  79,522
  85,046
  90,787
  96,757
  102,967
  109,430
  116,159
  123,168
  130,472
  138,089
  146,034
  154,327
  162,985
  172,030
  181,482
  191,364
  201,699
  212,511
  223,826
  235,671
Fixed operating expenses, $m
  14,997
  15,327
  15,664
  16,009
  16,361
  16,721
  17,089
  17,464
  17,849
  18,241
  18,643
  19,053
  19,472
  19,900
  20,338
  20,786
  21,243
  21,710
  22,188
  22,676
  23,175
  23,685
  24,206
  24,738
  25,283
  25,839
  26,407
  26,988
  27,582
  28,189
Total operating expenses, $m
  50,565
  54,572
  58,761
  63,131
  67,683
  72,417
  77,338
  82,447
  87,754
  93,260
  98,165
  104,099
  110,259
  116,657
  123,305
  130,216
  137,402
  144,878
  152,660
  160,765
  169,209
  178,012
  187,191
  196,768
  206,765
  217,203
  228,106
  239,499
  251,408
  263,860
Operating income, $m
  10,286
  12,717
  15,272
  17,950
  20,750
  23,675
  26,725
  29,904
  33,214
  36,661
  41,061
  44,798
  48,690
  52,743
  56,968
  61,373
  65,967
  70,762
  75,769
  80,999
  86,465
  92,181
  98,161
  104,419
  110,972
  117,835
  125,025
  132,562
  140,463
  148,750
EBITDA, $m
  13,593
  16,287
  19,119
  22,085
  25,187
  28,426
  31,803
  35,321
  38,985
  42,799
  46,770
  50,903
  55,206
  59,689
  64,359
  69,228
  74,306
  79,604
  85,135
  90,911
  96,948
  103,259
  109,860
  116,768
  123,999
  131,571
  139,504
  147,817
  156,530
  165,667
Interest expense (income), $m
  1,075
  1,974
  2,365
  2,775
  3,204
  3,652
  4,120
  4,607
  5,114
  5,641
  6,189
  6,759
  7,350
  7,966
  8,605
  9,270
  9,961
  10,681
  11,430
  12,211
  13,024
  13,873
  14,757
  15,681
  16,645
  17,652
  18,705
  19,805
  20,956
  22,160
  23,420
Earnings before tax, $m
  8,312
  10,352
  12,497
  14,746
  17,098
  19,555
  22,118
  24,790
  27,573
  30,472
  34,303
  37,448
  40,724
  44,139
  47,698
  51,412
  55,286
  59,332
  63,558
  67,975
  72,593
  77,424
  82,480
  87,774
  93,319
  99,130
  105,220
  111,606
  118,303
  125,329
Tax expense, $m
  2,244
  2,795
  3,374
  3,981
  4,617
  5,280
  5,972
  6,693
  7,445
  8,227
  9,262
  10,111
  10,995
  11,917
  12,879
  13,881
  14,927
  16,020
  17,161
  18,353
  19,600
  20,904
  22,270
  23,699
  25,196
  26,765
  28,409
  30,134
  31,942
  33,839
Net income, $m
  6,068
  7,557
  9,123
  10,764
  12,482
  14,275
  16,146
  18,097
  20,128
  22,245
  25,041
  27,337
  29,729
  32,221
  34,820
  37,530
  40,359
  43,312
  46,397
  49,622
  52,993
  56,520
  60,211
  64,075
  68,123
  72,365
  76,811
  81,472
  86,361
  91,490

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  87,304
  96,541
  106,216
  116,328
  126,876
  137,865
  149,301
  161,193
  173,555
  186,401
  199,751
  213,625
  228,047
  243,043
  258,642
  274,876
  291,778
  309,384
  327,732
  346,864
  366,821
  387,651
  409,400
  432,120
  455,863
  480,685
  506,645
  533,804
  562,226
  591,979
Adjusted assets (=assets-cash), $m
  87,304
  96,541
  106,216
  116,328
  126,876
  137,865
  149,301
  161,193
  173,555
  186,401
  199,751
  213,625
  228,047
  243,043
  258,642
  274,876
  291,778
  309,384
  327,732
  346,864
  366,821
  387,651
  409,400
  432,120
  455,863
  480,685
  506,645
  533,804
  562,226
  591,979
Revenue / Adjusted assets
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
Average production assets, $m
  19,959
  22,071
  24,283
  26,594
  29,006
  31,518
  34,132
  36,851
  39,677
  42,614
  45,666
  48,838
  52,135
  55,564
  59,130
  62,841
  66,705
  70,730
  74,925
  79,299
  83,861
  88,623
  93,595
  98,790
  104,218
  109,892
  115,827
  122,036
  128,534
  135,336
Working capital, $m
  15,639
  17,293
  19,026
  20,838
  22,727
  24,696
  26,744
  28,874
  31,089
  33,390
  35,781
  38,266
  40,850
  43,536
  46,330
  49,238
  52,266
  55,420
  58,706
  62,133
  65,708
  69,440
  73,335
  77,405
  81,658
  86,105
  90,755
  95,620
  100,711
  106,041
Total debt, $m
  43,801
  51,384
  59,327
  67,629
  76,289
  85,311
  94,700
  104,463
  114,612
  125,159
  136,120
  147,510
  159,350
  171,662
  184,469
  197,797
  211,674
  226,128
  241,192
  256,899
  273,284
  290,385
  308,242
  326,895
  346,388
  366,767
  388,080
  410,377
  433,712
  458,139
Total liabilities, $m
  71,677
  79,260
  87,203
  95,505
  104,165
  113,187
  122,576
  132,339
  142,488
  153,035
  163,996
  175,386
  187,226
  199,538
  212,345
  225,673
  239,550
  254,004
  269,068
  284,775
  301,160
  318,261
  336,118
  354,771
  374,264
  394,643
  415,956
  438,253
  461,588
  486,015
Total equity, $m
  15,627
  17,281
  19,013
  20,823
  22,711
  24,678
  26,725
  28,854
  31,066
  33,366
  35,755
  38,239
  40,820
  43,505
  46,297
  49,203
  52,228
  55,380
  58,664
  62,089
  65,661
  69,390
  73,283
  77,349
  81,599
  86,043
  90,689
  95,551
  100,638
  105,964
Total liabilities and equity, $m
  87,304
  96,541
  106,216
  116,328
  126,876
  137,865
  149,301
  161,193
  173,554
  186,401
  199,751
  213,625
  228,046
  243,043
  258,642
  274,876
  291,778
  309,384
  327,732
  346,864
  366,821
  387,651
  409,401
  432,120
  455,863
  480,686
  506,645
  533,804
  562,226
  591,979
Debt-to-equity ratio
  2.800
  2.970
  3.120
  3.250
  3.360
  3.460
  3.540
  3.620
  3.690
  3.750
  3.810
  3.860
  3.900
  3.950
  3.980
  4.020
  4.050
  4.080
  4.110
  4.140
  4.160
  4.180
  4.210
  4.230
  4.240
  4.260
  4.280
  4.290
  4.310
  4.320
Adjusted equity ratio
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,068
  7,557
  9,123
  10,764
  12,482
  14,275
  16,146
  18,097
  20,128
  22,245
  25,041
  27,337
  29,729
  32,221
  34,820
  37,530
  40,359
  43,312
  46,397
  49,622
  52,993
  56,520
  60,211
  64,075
  68,123
  72,365
  76,811
  81,472
  86,361
  91,490
Depreciation, amort., depletion, $m
  3,306
  3,570
  3,847
  4,136
  4,437
  4,751
  5,078
  5,418
  5,771
  6,138
  5,708
  6,105
  6,517
  6,945
  7,391
  7,855
  8,338
  8,841
  9,366
  9,912
  10,483
  11,078
  11,699
  12,349
  13,027
  13,737
  14,478
  15,255
  16,067
  16,917
Funds from operations, $m
  9,374
  11,127
  12,970
  14,900
  16,919
  19,026
  21,224
  23,514
  25,899
  28,383
  30,749
  33,442
  36,245
  39,167
  42,211
  45,386
  48,697
  52,154
  55,763
  59,534
  63,475
  67,597
  71,910
  76,424
  81,150
  86,101
  91,289
  96,727
  102,428
  108,407
Change in working capital, $m
  1,575
  1,655
  1,733
  1,811
  1,890
  1,968
  2,048
  2,130
  2,214
  2,301
  2,391
  2,485
  2,583
  2,686
  2,794
  2,908
  3,028
  3,154
  3,287
  3,427
  3,575
  3,731
  3,896
  4,070
  4,253
  4,446
  4,650
  4,865
  5,091
  5,330
Cash from operations, $m
  7,799
  9,473
  11,237
  13,089
  15,029
  17,058
  19,176
  21,384
  23,685
  26,082
  28,358
  30,956
  33,662
  36,480
  39,417
  42,478
  45,670
  49,000
  52,476
  56,107
  59,900
  63,866
  68,014
  72,354
  76,897
  81,655
  86,639
  91,862
  97,337
  103,078
Maintenance CAPEX, $m
  -2,246
  -2,495
  -2,759
  -3,035
  -3,324
  -3,626
  -3,940
  -4,267
  -4,606
  -4,960
  -5,327
  -5,708
  -6,105
  -6,517
  -6,945
  -7,391
  -7,855
  -8,338
  -8,841
  -9,366
  -9,912
  -10,483
  -11,078
  -11,699
  -12,349
  -13,027
  -13,737
  -14,478
  -15,255
  -16,067
New CAPEX, $m
  -1,988
  -2,112
  -2,212
  -2,312
  -2,412
  -2,512
  -2,614
  -2,719
  -2,826
  -2,937
  -3,052
  -3,172
  -3,297
  -3,428
  -3,566
  -3,711
  -3,864
  -4,025
  -4,195
  -4,374
  -4,563
  -4,762
  -4,972
  -5,194
  -5,428
  -5,675
  -5,935
  -6,209
  -6,498
  -6,802
Cash from investing activities, $m
  -4,234
  -4,607
  -4,971
  -5,347
  -5,736
  -6,138
  -6,554
  -6,986
  -7,432
  -7,897
  -8,379
  -8,880
  -9,402
  -9,945
  -10,511
  -11,102
  -11,719
  -12,363
  -13,036
  -13,740
  -14,475
  -15,245
  -16,050
  -16,893
  -17,777
  -18,702
  -19,672
  -20,687
  -21,753
  -22,869
Free cash flow, $m
  3,565
  4,866
  6,266
  7,742
  9,293
  10,920
  12,622
  14,399
  16,253
  18,185
  19,979
  22,076
  24,260
  26,535
  28,905
  31,375
  33,950
  36,637
  39,440
  42,367
  45,425
  48,622
  51,964
  55,461
  59,121
  62,953
  66,967
  71,174
  75,584
  80,209
Issuance/(repayment) of debt, $m
  7,248
  7,583
  7,943
  8,302
  8,660
  9,022
  9,389
  9,764
  10,149
  10,547
  10,960
  11,391
  11,840
  12,312
  12,807
  13,328
  13,876
  14,454
  15,064
  15,707
  16,385
  17,101
  17,856
  18,653
  19,493
  20,379
  21,313
  22,297
  23,335
  24,427
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  7,248
  7,583
  7,943
  8,302
  8,660
  9,022
  9,389
  9,764
  10,149
  10,547
  10,960
  11,391
  11,840
  12,312
  12,807
  13,328
  13,876
  14,454
  15,064
  15,707
  16,385
  17,101
  17,856
  18,653
  19,493
  20,379
  21,313
  22,297
  23,335
  24,427
Total cash flow (excl. dividends), $m
  10,812
  12,449
  14,209
  16,043
  17,954
  19,942
  22,010
  24,162
  26,402
  28,732
  30,939
  33,467
  36,101
  38,847
  41,712
  44,703
  47,827
  51,091
  54,504
  58,074
  61,811
  65,723
  69,820
  74,113
  78,614
  83,332
  88,280
  93,472
  98,919
  104,636
Retained Cash Flow (-), $m
  -1,547
  -1,653
  -1,732
  -1,810
  -1,888
  -1,967
  -2,047
  -2,129
  -2,213
  -2,300
  -2,390
  -2,483
  -2,582
  -2,684
  -2,792
  -2,906
  -3,025
  -3,151
  -3,284
  -3,425
  -3,572
  -3,728
  -3,893
  -4,067
  -4,250
  -4,443
  -4,647
  -4,861
  -5,088
  -5,326
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
  9,265
  10,796
  12,477
  14,234
  16,066
  17,975
  19,963
  22,034
  24,189
  26,433
  28,550
  30,983
  33,519
  36,163
  38,920
  41,797
  44,801
  47,940
  51,220
  54,650
  58,238
  61,994
  65,927
  70,047
  74,364
  78,889
  83,634
  88,610
  93,832
  99,310
Discount rate, %
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
  8,578
  9,188
  9,683
  9,987
  10,102
  10,031
  9,787
  9,386
  8,850
  8,205
  7,420
  6,650
  5,853
  5,058
  4,289
  3,565
  2,904
  2,315
  1,805
  1,375
  1,023
  741
  523
  359
  239
  155
  97
  59
  34
  19
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Caterpillar Inc. is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The Company operates through segments, including Construction Industries, which is engaged in supporting customers using machinery in infrastructure, forestry and building construction; Resource Industries, which is engaged in supporting customers using machinery in mining, quarry, waste and material handling applications; Energy & Transportation, which supports customers in oil and gas, power generation, marine, rail and industrial applications, including Cat machines; Financial Products segment, which provides financing and related services, and All Other operating segments, which includes activities, such as product management and development, and manufacturing of filters and fluids, undercarriage, tires and rims, ground engaging tools, fluid transfer products, and sealing and connecting components for Cat products.

FINANCIAL RATIOS  of  Caterpillar, Inc. (CAT)

Valuation Ratios
P/E Ratio -1045
Price to Sales 1.8
Price to Book 5.3
Price to Tangible Book
Price to Cash Flow 12.5
Price to Free Cash Flow 26.1
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 27.2%
Gross Margin - 3 Yr. Avg. 27.5%
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 $54722 million for the last fiscal year's total revenue generated by Caterpillar, Inc.. The default revenue input number comes from 0001 income statement of Caterpillar, Inc.. 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 11.2% 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 8%, whose default value for CAT is calculated based on our internal credit rating of Caterpillar, Inc., 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, Inc..
    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 58.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14674 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 5.4% for Caterpillar, Inc..

Corporate tax rate of 27% is the nominal tax rate for Caterpillar, Inc.. 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 32.8%.

Life of production assets of 8 years is the average useful life of capital assets used in Caterpillar, Inc. 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 25.7%. 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 - $14080 million for Caterpillar, Inc. - 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 575.563 million for Caterpillar, Inc. 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, Inc. at the current share price and the inputted number of shares is $68.7 billion.

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