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Is Caterpillar Inc. (NYSE:CAT) Potentially Undervalued?

Simply Wall St

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Let's talk about the popular Caterpillar Inc. (NYSE:CAT). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $143.36 at one point, and dropping to the lows of $119.81. 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 $122.08 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.

Check out our latest analysis for Caterpillar

What is Caterpillar worth?

Good news, investors! Caterpillar is still a bargain right now. According to my valuation, the intrinsic value for the stock is $198.46, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. 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 does the future of Caterpillar look like?

NYSE:CAT Past and Future Earnings, June 5th 2019

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. Caterpillar’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since CAT is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on CAT for a while, now might be the time to make a leap. Its buoyant future 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 track record of its management team, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Caterpillar. You can find everything you need to know about Caterpillar in the latest infographic research report. If you are no longer interested in Caterpillar, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.