At US$342, Is It Time To Put Caterpillar Inc. (NYSE:CAT) On Your Watch List?

Caterpillar Inc. (NYSE:CAT) saw significant share price movement during recent months on the NYSE, rising to highs of US$363 and falling to the lows of US$317. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Caterpillar's current trading price of US$342 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Caterpillar’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Caterpillar

What Is Caterpillar Worth?

Great news for investors – Caterpillar is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is $447.02, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Caterpillar’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Caterpillar generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Caterpillar, it is expected to deliver a negative earnings growth of -6.4%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although CAT is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to CAT, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on CAT for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, Caterpillar has 3 warning signs (and 1 which is potentially serious) we think you should know about.

If you are no longer interested in Caterpillar, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.