Is There Now An Opportunity In Caterpillar Inc. (NYSE:CAT)?

Today we're going to take a look at the well-established Caterpillar Inc. (NYSE:CAT). The company's stock saw a decent share price growth of 15% on the NYSE over the last few months. The company is inching closer to its yearly highs following the recent share price climb. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Caterpillar’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Caterpillar

What's The Opportunity In Caterpillar?

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 $502.78, but it is currently trading at US$359 on the share market, meaning that there is still an opportunity to buy now. However, given that Caterpillar’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Caterpillar generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 -5.6%, 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 adverse prospect of negative growth brings about some degree of 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 tabs on CAT for some time, 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.

So while earnings quality is important, it's equally important to consider the risks facing Caterpillar at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Caterpillar (including 1 which is significant).

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.