Intrinsic value of Caterpillar - CAT

Previous Close

$124.47

  Intrinsic Value

$585.23

stock screener

  Rating & Target

str. buy

+370%

Previous close

$124.47

 
Intrinsic value

$585.23

 
Up/down potential

+370%

 
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 74.0

 

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, %
  23.70
  21.83
  20.15
  18.63
  17.27
  16.04
  14.94
  13.94
  13.05
  12.24
  11.52
  10.87
  10.28
  9.75
  9.28
  8.85
  8.47
  8.12
  7.81
  7.53
  7.27
  7.05
  6.84
  6.66
  6.49
  6.34
  6.21
  6.09
  5.98
  5.88
Revenue, $m
  56,236
  68,513
  82,316
  97,654
  114,517
  132,889
  152,739
  174,038
  196,749
  220,841
  246,282
  273,049
  301,122
  330,491
  361,154
  393,117
  426,395
  461,012
  497,002
  534,407
  573,277
  613,671
  655,655
  699,305
  744,701
  791,933
  841,098
  892,299
  945,647
  1,001,259
Variable operating expenses, $m
  24,322
  29,450
  35,216
  41,623
  48,667
  56,341
  64,633
  73,530
  83,017
  93,080
  102,877
  114,058
  125,784
  138,052
  150,861
  164,212
  178,113
  192,573
  207,607
  223,232
  239,469
  256,342
  273,880
  292,113
  311,076
  330,805
  351,343
  372,730
  395,015
  418,245
Fixed operating expenses, $m
  22,196
  22,684
  23,183
  23,693
  24,214
  24,747
  25,292
  25,848
  26,417
  26,998
  27,592
  28,199
  28,819
  29,453
  30,101
  30,763
  31,440
  32,132
  32,839
  33,561
  34,300
  35,054
  35,825
  36,614
  37,419
  38,242
  39,084
  39,943
  40,822
  41,720
Total operating expenses, $m
  46,518
  52,134
  58,399
  65,316
  72,881
  81,088
  89,925
  99,378
  109,434
  120,078
  130,469
  142,257
  154,603
  167,505
  180,962
  194,975
  209,553
  224,705
  240,446
  256,793
  273,769
  291,396
  309,705
  328,727
  348,495
  369,047
  390,427
  412,673
  435,837
  459,965
Operating income, $m
  9,719
  16,379
  23,917
  32,338
  41,636
  51,800
  62,815
  74,660
  87,316
  100,762
  115,814
  130,792
  146,518
  162,986
  180,192
  198,141
  216,841
  236,307
  256,556
  277,614
  299,509
  322,275
  345,950
  370,578
  396,206
  422,886
  450,672
  479,626
  509,810
  541,294
EBITDA, $m
  13,474
  20,772
  29,028
  38,247
  48,422
  59,542
  71,588
  84,541
  98,378
  113,077
  128,620
  144,991
  162,177
  180,171
  198,972
  218,583
  239,014
  260,279
  282,400
  305,403
  329,319
  354,186
  380,044
  406,942
  434,931
  464,066
  494,409
  526,025
  558,984
  593,359
Interest expense (income), $m
  1,075
  1,883
  2,689
  3,610
  4,646
  5,796
  7,061
  8,439
  9,929
  11,526
  13,230
  15,037
  16,946
  18,954
  21,060
  23,263
  25,563
  27,961
  30,457
  33,054
  35,754
  38,559
  41,475
  44,505
  47,655
  50,929
  54,335
  57,878
  61,566
  65,407
  69,409
Earnings before tax, $m
  7,835
  13,689
  20,307
  27,692
  35,840
  44,739
  54,375
  64,731
  75,789
  87,532
  100,776
  113,847
  127,565
  141,926
  156,929
  172,578
  188,881
  205,850
  223,503
  241,860
  260,949
  280,800
  301,445
  322,924
  345,277
  368,551
  392,794
  418,060
  444,403
  471,885
Tax expense, $m
  2,115
  3,696
  5,483
  7,477
  9,677
  12,079
  14,681
  17,477
  20,463
  23,634
  27,210
  30,739
  34,442
  38,320
  42,371
  46,596
  50,998
  55,579
  60,346
  65,302
  70,456
  75,816
  81,390
  87,189
  93,225
  99,509
  106,054
  112,876
  119,989
  127,409
Net income, $m
  5,720
  9,993
  14,824
  20,215
  26,163
  32,659
  39,694
  47,254
  55,326
  63,899
  73,567
  83,108
  93,122
  103,606
  114,558
  125,982
  137,883
  150,270
  163,157
  176,558
  190,493
  204,984
  220,055
  235,734
  252,052
  269,042
  286,740
  305,184
  324,415
  344,476

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
  95,155
  115,927
  139,283
  165,235
  193,769
  224,854
  258,442
  294,480
  332,909
  373,673
  416,721
  462,011
  509,512
  559,207
  611,090
  665,172
  721,480
  780,054
  840,951
  904,242
  970,012
  1,038,360
  1,109,400
  1,183,257
  1,260,069
  1,339,989
  1,423,178
  1,509,813
  1,600,080
  1,694,177
Adjusted assets (=assets-cash), $m
  95,155
  115,927
  139,283
  165,235
  193,769
  224,854
  258,442
  294,480
  332,909
  373,673
  416,721
  462,011
  509,512
  559,207
  611,090
  665,172
  721,480
  780,054
  840,951
  904,242
  970,012
  1,038,360
  1,109,400
  1,183,257
  1,260,069
  1,339,989
  1,423,178
  1,509,813
  1,600,080
  1,694,177
Revenue / Adjusted assets
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
Average production assets, $m
  23,394
  28,501
  34,244
  40,624
  47,639
  55,282
  63,540
  72,400
  81,848
  91,870
  102,453
  113,588
  125,267
  137,484
  150,240
  163,537
  177,380
  191,781
  206,753
  222,313
  238,483
  255,287
  272,753
  290,911
  309,796
  329,444
  349,897
  371,197
  393,389
  416,524
Working capital, $m
  14,959
  18,224
  21,896
  25,976
  30,462
  35,348
  40,629
  46,294
  52,335
  58,744
  65,511
  72,631
  80,098
  87,911
  96,067
  104,569
  113,421
  122,629
  132,203
  142,152
  152,492
  163,236
  174,404
  186,015
  198,090
  210,654
  223,732
  237,352
  251,542
  266,335
Total debt, $m
  49,804
  66,858
  86,033
  107,340
  130,766
  156,287
  183,863
  213,450
  245,000
  278,467
  313,810
  350,993
  389,992
  430,791
  473,387
  517,788
  564,017
  612,106
  662,103
  714,065
  768,062
  824,176
  882,499
  943,136
  1,006,199
  1,071,813
  1,140,111
  1,211,238
  1,285,347
  1,362,601
Total liabilities, $m
  78,122
  95,176
  114,351
  135,658
  159,084
  184,605
  212,181
  241,768
  273,318
  306,785
  342,128
  379,311
  418,310
  459,109
  501,705
  546,106
  592,335
  640,424
  690,421
  742,383
  796,380
  852,494
  910,817
  971,454
  1,034,517
  1,100,131
  1,168,429
  1,239,556
  1,313,665
  1,390,919
Total equity, $m
  17,033
  20,751
  24,932
  29,577
  34,685
  40,249
  46,261
  52,712
  59,591
  66,887
  74,593
  82,700
  91,203
  100,098
  109,385
  119,066
  129,145
  139,630
  150,530
  161,859
  173,632
  185,866
  198,583
  211,803
  225,552
  239,858
  254,749
  270,257
  286,414
  303,258
Total liabilities and equity, $m
  95,155
  115,927
  139,283
  165,235
  193,769
  224,854
  258,442
  294,480
  332,909
  373,672
  416,721
  462,011
  509,513
  559,207
  611,090
  665,172
  721,480
  780,054
  840,951
  904,242
  970,012
  1,038,360
  1,109,400
  1,183,257
  1,260,069
  1,339,989
  1,423,178
  1,509,813
  1,600,079
  1,694,177
Debt-to-equity ratio
  2.920
  3.220
  3.450
  3.630
  3.770
  3.880
  3.970
  4.050
  4.110
  4.160
  4.210
  4.240
  4.280
  4.300
  4.330
  4.350
  4.370
  4.380
  4.400
  4.410
  4.420
  4.430
  4.440
  4.450
  4.460
  4.470
  4.480
  4.480
  4.490
  4.490
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
  5,720
  9,993
  14,824
  20,215
  26,163
  32,659
  39,694
  47,254
  55,326
  63,899
  73,567
  83,108
  93,122
  103,606
  114,558
  125,982
  137,883
  150,270
  163,157
  176,558
  190,493
  204,984
  220,055
  235,734
  252,052
  269,042
  286,740
  305,184
  324,415
  344,476
Depreciation, amort., depletion, $m
  3,755
  4,394
  5,112
  5,909
  6,786
  7,741
  8,774
  9,881
  11,062
  12,315
  12,807
  14,199
  15,658
  17,186
  18,780
  20,442
  22,173
  23,973
  25,844
  27,789
  29,810
  31,911
  34,094
  36,364
  38,724
  41,181
  43,737
  46,400
  49,174
  52,065
Funds from operations, $m
  9,475
  14,387
  19,935
  26,124
  32,949
  40,401
  48,467
  57,135
  66,388
  76,213
  86,373
  97,306
  108,781
  120,792
  133,338
  146,424
  160,056
  174,243
  189,001
  204,347
  220,303
  236,895
  254,149
  272,098
  290,777
  310,223
  330,477
  351,583
  373,588
  396,542
Change in working capital, $m
  2,866
  3,266
  3,672
  4,080
  4,486
  4,887
  5,280
  5,665
  6,041
  6,408
  6,767
  7,120
  7,467
  7,812
  8,156
  8,502
  8,852
  9,208
  9,573
  9,950
  10,339
  10,745
  11,168
  11,611
  12,075
  12,564
  13,078
  13,619
  14,190
  14,793
Cash from operations, $m
  6,609
  11,121
  16,264
  22,044
  28,463
  35,514
  43,187
  51,469
  60,347
  69,805
  79,606
  90,187
  101,313
  112,979
  125,182
  137,922
  151,204
  165,035
  179,428
  194,398
  209,964
  226,150
  242,981
  260,487
  278,701
  297,659
  317,399
  337,964
  359,398
  381,749
Maintenance CAPEX, $m
  -2,364
  -2,924
  -3,563
  -4,280
  -5,078
  -5,955
  -6,910
  -7,942
  -9,050
  -10,231
  -11,484
  -12,807
  -14,199
  -15,658
  -17,186
  -18,780
  -20,442
  -22,173
  -23,973
  -25,844
  -27,789
  -29,810
  -31,911
  -34,094
  -36,364
  -38,724
  -41,181
  -43,737
  -46,400
  -49,174
New CAPEX, $m
  -4,486
  -5,107
  -5,742
  -6,380
  -7,015
  -7,642
  -8,258
  -8,860
  -9,448
  -10,022
  -10,584
  -11,135
  -11,678
  -12,218
  -12,756
  -13,296
  -13,844
  -14,401
  -14,972
  -15,560
  -16,170
  -16,804
  -17,466
  -18,158
  -18,885
  -19,649
  -20,453
  -21,300
  -22,193
  -23,134
Cash from investing activities, $m
  -6,850
  -8,031
  -9,305
  -10,660
  -12,093
  -13,597
  -15,168
  -16,802
  -18,498
  -20,253
  -22,068
  -23,942
  -25,877
  -27,876
  -29,942
  -32,076
  -34,286
  -36,574
  -38,945
  -41,404
  -43,959
  -46,614
  -49,377
  -52,252
  -55,249
  -58,373
  -61,634
  -65,037
  -68,593
  -72,308
Free cash flow, $m
  -240
  3,090
  6,959
  11,384
  16,370
  21,917
  28,019
  34,667
  41,849
  49,552
  57,539
  66,245
  75,436
  85,103
  95,241
  105,846
  116,918
  128,461
  140,483
  152,993
  166,005
  179,536
  193,605
  208,235
  223,453
  239,286
  255,766
  272,927
  290,806
  309,441
Issuance/(repayment) of debt, $m
  14,926
  17,054
  19,175
  21,306
  23,427
  25,521
  27,576
  29,587
  31,550
  33,467
  35,343
  37,183
  38,999
  40,799
  42,596
  44,402
  46,229
  48,090
  49,996
  51,962
  53,997
  56,114
  58,324
  60,636
  63,063
  65,614
  68,299
  71,127
  74,109
  77,254
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  
  14,926
  17,054
  19,175
  21,306
  23,427
  25,521
  27,576
  29,587
  31,550
  33,467
  35,343
  37,183
  38,999
  40,799
  42,596
  44,402
  46,229
  48,090
  49,996
  51,962
  53,997
  56,114
  58,324
  60,636
  63,063
  65,614
  68,299
  71,127
  74,109
  77,254
Total cash flow (excl. dividends), $m
  14,686
  20,144
  26,134
  32,690
  39,797
  47,437
  55,595
  64,254
  73,399
  83,019
  92,881
  103,428
  114,435
  125,902
  137,837
  150,247
  163,147
  176,551
  190,479
  204,955
  220,002
  235,650
  251,928
  268,872
  286,516
  304,900
  324,065
  344,054
  364,914
  386,695
Retained Cash Flow (-), $m
  -3,267
  -3,718
  -4,181
  -4,645
  -5,108
  -5,564
  -6,012
  -6,451
  -6,879
  -7,297
  -7,706
  -8,107
  -8,503
  -8,895
  -9,287
  -9,681
  -10,079
  -10,485
  -10,901
  -11,329
  -11,773
  -12,234
  -12,716
  -13,220
  -13,749
  -14,306
  -14,891
  -15,508
  -16,158
  -16,843
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
  11,419
  16,426
  21,953
  28,044
  34,689
  41,873
  49,583
  57,803
  66,520
  75,723
  85,176
  95,321
  105,932
  117,007
  128,550
  140,566
  153,068
  166,066
  179,579
  193,626
  208,229
  223,415
  239,212
  255,651
  272,766
  290,594
  309,174
  328,546
  348,757
  369,851
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
  10,573
  13,979
  17,036
  19,678
  21,811
  23,367
  24,307
  24,623
  24,338
  23,505
  22,138
  20,458
  18,498
  16,366
  14,165
  11,990
  9,921
  8,020
  6,329
  4,872
  3,656
  2,671
  1,898
  1,311
  878
  571
  359
  218
  128
  72
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 (CAT)

Valuation Ratios
P/E Ratio -1089.6
Price to Sales 1.9
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 27.2
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 $45462 million for the last fiscal year's total revenue generated by Caterpillar. The default revenue input number comes from 0001 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 23.7% 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, 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 43.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $21718 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.

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 41.6%.

Life of production assets of 8 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 26.6%. 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 - $13766 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 594.325 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 $74.0 billion.

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COMPANY NEWS

▶ Caterpillar Announces Officer Changes   [Dec-18-18 07:30PM  PR Newswire]
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▶ [$$] Caterpillar Puts CEO Back in Charge of Board   [Dec-13-18 07:36PM  The Wall Street Journal]
▶ [$$] Caterpillar Puts CEO Back in Charge of Board   [04:39PM  The Wall Street Journal]
▶ Caterpillar Inc. Maintains Dividend   [12:30PM  PR Newswire]
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▶ Caterpillar to lay off 285 employees   [09:41AM  American City Business Journals]
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▶ Stocks - Dow Erases Gains for Year on Tech, Trade Turmoil   [Dec-07-18 06:51PM  Investing.com]
▶ Do Hedge Funds Love Caterpillar Inc. (NYSE:CAT)?   [Dec-05-18 03:18PM  Insider Monkey]
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