What Is Caterpillar Inc.'s (NYSE:CAT) Share Price Doing?

Let's talk about the popular Caterpillar Inc. (NYSE:CAT). The company's shares saw a decent share price growth of 20% 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. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Caterpillar’s outlook and valuation 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 according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Caterpillar’s ratio of 17.86x is below its peer average of 24.83x, which indicates the stock is trading at a lower price compared to the Machinery industry. Although, there may be another chance to buy again in the future. This is because Caterpillar’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Caterpillar?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Caterpillar, it is expected to deliver a relatively unexciting earnings growth of 1.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since CAT is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on CAT for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CAT. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Caterpillar has 3 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.

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.