Caterpillar Inc. (CAT) Stock Analysis: Score 35.9/100, Valuation & FAQ

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CAT

Caterpillar Inc. · Farm & Heavy Construction Machinery

35.9Score

$800.47Oct 9 close$368.0B

1Y Target$970.80Analyst consensus · 26 analysts

5Y Target$1,421Compound horizon

10Y Target$2,108Long-dated conviction

FCF$9.0bTTM · 06/26

B+

FCF $9.0b — strong cash profile, above most peers · Trailing twelve months to 06/26 (operating cash flow − capex).

Rev+4.3%FY YoY

C+

Revenue +4.3% — steady but below market-beating range · Computed from the last two annual revenue figures (FY YoY).

D/E2.33

D/E 2.33 — most levered decile in Industrials (≈95th pctile)

P/E34.3x

C+

P/E 34.3 — above the Industrials median (≈75th pctile)

PEG1.39

PEG 1.39 — acceptable premium for growth

Targets: 1-year is analyst consensus where covered, 5- and 10-year are model estimates; the DCF is a cross-check, not a target. Methodology

Quality-growth score · 35.9

Quality75.6

Growth50.0

Value12.3

Why this score

Raising its dividend
Cyclical growth

Entry · Margin of safety

52-week rangeMid-range

25% off the 12-month high

vs DCF fair value250% aboveest. fair value ~$229

What the price assumes: free cash flow growing about 42% next year, slowing to 4% a year by year ten — vs a starting rate of ~10% our model takes as the middle of three readings — analyst estimates, last year's revenue growth, and the company's own multi-year record.

Model-generatedWritten Sep 3, 2026 from the fundamentals then; figures in the text are as of that day, today's are above · Editorial standards

Why now

CAT is a compounder riding a 18.4% revenue surge in Construction and Resource Industries, fueled by global infrastructure and mining demand for its track-type tractors, electric rope shovels, and wheel loaders — products with 18-24 month lead times and high switching costs. The Bull Rankings model gives CAT a Quality-growth score of 48.6/100, with its strongest pillar being Quality (76/100), where a 55.9% ROE reflects pricing power from category leadership in heavy machinery. The crux: this ROE is sustainable because dealers and miners can't replicate CAT's dealer network or aftermarket parts ecosystem in under five years.

Moat

CAT's moat is the dealer network: its 180+ dealers worldwide hold inventory, provide financing, and perform maintenance, creating a switching cost that keeps customers locked in for life. This is visible in the 55.9% ROE, driven by pricing power in high-margin aftermarket parts and services, not just equipment sales. Competitors like Komatsu or Volvo can build machines, but replicating CAT's 24/7 parts availability across remote mining sites is a decade-long endeavor.

Risk

The bear case is simple: at a P/E of 34.5x, CAT prices in perfection. The Bull Rankings model flags Value as the weakest pillar (30/100), and the reverse DCF implies 42% FCF growth for a decade — far above the 18.4% revenue growth. The concrete signal to sell: if FCF growth decelerates below 15% YoY for two consecutive quarters, the premium multiple collapses.

Horizon

1-3 yr $970.80 (26-analyst consensus) — fundamentals + valuation re-rating. 5 yr $1,421 at ~12% CAGR — compounding case rests on the competitive position widening. 10 yr $2,108 if current growth sustains into durable earnings power.

CAT vs the Top Picks average

Pillar	CAT	Book avg	Diff
Quality	76	83	-7
Growth	50	89	-39
Value	12	76	-64

Average of today's Top 30 (mean score 82.6); size and sector limits also decide the book.

Score history · CAT

Trend

-4.3 over 80 daily scores

From 40.2 (Jun 22) → 35.9 (now)

One point per daily run; read From → To for the actual range.

CAT at a glance

Same audited fundamentals as the score, unless a card says otherwise.

Analyst estimate revisions

30-day change	+0.1%
90-day change	+6.6%
Forward EPS estimate	$32.42

Over the last 90 days, what analysts expect CAT to earn is materially higher (+6.6%). The estimate is derived from price and forward P/E captured at the same instant, so a moving share price does not move this number — only a changed forecast does.

Estimates move both ways and are not part of the Bull Rankings score. Biggest movers →

Position sizing · CAT

Portfolio

Risk per trade

Stop loss below entry

Shares to buy

Position size

$1,601

3.2% of portfolio

Stop price

$600.35

25% below $800.47

$ at risk if stopped

$400.24

budget $500.00 · 1% of portfolio

Math only: excludes commissions, slippage and gap risk. Inputs stay in your browser.

The Bull Rankings deep dive

Analysis as of September 10, 2026 · figures are as written that day and are not updated. Today's numbers are in the cards above.

Written by the Bull Rankings model from fundamentals as of Jun 30, 2026, and checked against those figures. How we source & verify every figure →

The Bull Rankings scorecard — our quality-growth score is 48.2 / 100, built from three pillars scored 0–100: Quality 76, Growth 50, Value 30 (valuation is judged against sector peers). At today's price, our reverse-DCF read says the market is implicitly betting on free-cash-flow growth of about 42% a year next year, fading to 3% a year by year ten — a gauge of how much optimism is already in the stock.

The thesis

Caterpillar’s current price reflects a high‑quality compounder that is already priced for a 42 % free‑cash‑flow growth rate (in year one, slowing to 3% a year by year ten), far above its 18.4 % revenue growth. The Bull Rankings model gives CAT a 48.2/100 quality‑growth score, with a Quality pillar of 76 and a Value pillar of 30. The story is clear: the company’s durable moat and strong returns justify a premium, while its valuation already assumes aggressive growth. The three figures that lock this view in are ROE of 55.9 %, profit margin of 14.5 %, and free‑cash‑flow of $9.0 b. Together they paint a picture of a business that not only earns high returns but also generates cash at a pace that can sustain dividend hikes and share buybacks.

What the business actually is

Caterpillar sells heavy‑duty construction and mining equipment, off‑highway diesel and natural‑gas engines, industrial gas turbines, and diesel‑electric locomotives worldwide. The Construction Industries segment delivers asphalt pavers, cold planers, compactors, forestry machines, material handlers, motor graders, pipelayers, road reclaimers, telehandlers, track‑type tractors, and both track and wheel excavators. It also offers backhoes, compact track, skid steers, and loaders. The Resource Industries segment supplies electric rope and hydraulic shovels, draglines, rotary drills, hard‑rock vehicles, mining trucks, and wheel loaders. These product lines serve infrastructure, mining, and energy customers who need reliable, high‑performance machines.

Why it can (or can't) keep compounding

The moat is built on brand dominance, high switching costs, and a global service network. Caterpillar’s 55.9 % ROE shows it turns equity into profit at a rate that rivals the best in industrials. Profit margins of 14.5 % are maintained through scale, efficient manufacturing, and a pricing power that competitors struggle to match. The company’s R&D pipeline keeps its equipment at the cutting edge, while its extensive dealer and parts network ensures recurring revenue streams. The model’s “Raising its dividend” signal points to management’s confidence in sustained cash flow.

The valuation question

At a current price of $815.56 and a P/E of 35.2, the market is already pricing in a 42 % free‑cash‑flow growth rate (in year one, slowing to 3% a year by year ten). This implied growth far exceeds the 18.4 % revenue growth reported for FY YoY. The reverse‑DCF tells us the stock is fairly valued only if free cash flow grows far faster than revenue has; if revenue growth stalls, the price is over‑optimistic. The PEG ratio of 1.42 suggests the market is not yet fully skeptical, but the high P/E indicates a premium. The current price sits below the analyst consensus 1‑year target of $975.61, leaving room for upside if the growth narrative holds.

The bear case

The weakest pillar in our model is Value at 30. A low value score signals that the market may be overpaying for the business. The debt‑to‑equity of 2.33 raises leverage concerns; if commodity cycles turn, the company could face cash‑flow pressure. A concrete trigger would be a drop in free‑cash‑flow below $9.0 b or a revenue growth slowdown below 18.4 %. Such a shift would erode the implied 42 % growth assumption and force a re‑pricing.

What would change our mind

Revenue growth falling below 18.4 % for two consecutive quarters would undermine the 42 % implied growth assumption.
ROE slipping below 55.9 % would signal declining operational efficiency.
Debt‑to‑equity rising past 2.5 would heighten financial risk and could trigger a dividend cut.

If any of these thresholds are breached, the high‑quality narrative weakens, and the stock’s premium becomes unjustified.

Caterpillar Inc. (CAT): score, valuation & FAQ

Caterpillar Inc. (CAT) is a Farm & Heavy Construction Machinery company that scores 35.9 out of 100 on the Bull Rankings quality-growth model — a weak reading. The score blends three pillars — quality (durable returns, healthy margins, low leverage), growth (revenue and earnings), and value (valuation versus sector peers) — into one number, refreshed daily; it is a screen, not a buy recommendation.

Its strongest graded signals are FCF (B+), while D/E (D) rate weaker. On valuation, CAT sits about 250% above our discounted-cash-flow fair value — the current price implies free cash flow growing about 42% next year, slowing to 4% a year by year ten.

Is CAT a good stock to buy?

Bull Rankings scores CAT 35.9 out of 100 on its quality-growth model, which is a weak reading. That is driven by FCF (B+). A score is a quantitative screen of Caterpillar Inc.'s fundamentals, not personalised financial advice — weigh it against your own time horizon and risk tolerance, and read the risk factors below before acting.

Why does CAT score 35.9 on Bull Rankings?

The score leans on quality at 75.6 out of 100, with value the weakest pillar at 12.3 — the three combine geometrically, so a weak one cannot be papered over by a strong one. CAT earns its highest marks on FCF (B+), and is held back by D/E (D). Each signal is graded against sector-aware thresholds rather than one absolute bar, so CAT is measured against Farm & Heavy Construction Machinery peers, not against the market as a whole.

Is CAT overvalued or undervalued?

Based on $800.47, CAT sits about 250% above our discounted-cash-flow fair value — the current price implies free cash flow growing about 42% next year, slowing to 4% a year by year ten. It trades at a 34.3x P/E (graded C+). Discounted-cash-flow estimates are sensitive to growth and discount-rate assumptions, so treat this as a cross-check, not a price target.

What are the main risks of investing in CAT?

The bear case is simple: at a P/E of 34.5x, CAT prices in perfection. The Bull Rankings model flags Value as the weakest pillar (30/100), and the reverse DCF implies 42% FCF growth for a decade — far above the 18.4% revenue growth. The concrete signal to sell: if FCF growth decelerates below 15% YoY for two consecutive quarters, the premium multiple collapses.

New to these metrics? See the guides and the methodology.

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