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Caterpillar Inc. Message Board

  • southbuckeye southbuckeye Nov 19, 2009 12:17 PM Flag

    Overpriced

    CAT will probably earn two dollars per share this year. A normal PE of 15 would indicate a price of 30. CAT is selling for almost twice that. Don't you think CAT's maybey, uh, overpriced a bit at todays prices?

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    • "CAT will probably earn two dollars per share this year. A normal PE of 15 would indicate a price of 30. CAT is selling for almost twice that. Don't you think CAT's maybey, uh, overpriced a bit at todays prices? "

      We've had this discussion about 30 times since summer. It depends on your investment horizon. If you're looking one week, one month, one year out, yes, it's probably overpriced. If you're looking more than one year out, as many investors do, it's a good buy before the next boom.

      Much confusion is caused by not realizing investors differ. You have a range of expectations over a range of time frames. The market comprises all investors and averages all expectations into the current price.

      I suggest you study the Modigliani-Miller theorem. It shows the best estimate of the value of the company is the current stock price.

    • You have to ask yourself, do I allow more for a P/E when times are tuff? Does it mean anything if a company can maintain a 25 P/E ratio thru a depression? These are the questions you should ask yourself. Then act acording.

 
CAT
109.07+0.42(+0.39%)Aug 29 4:00 PMEDT

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