In December 2017, Caterpillar Inc (NYSE:CAT) announced its latest earnings update, which confirmed that the business turned profitable again after incurring negative earnings in the previous financial year. Below, I’ve laid out key growth figures on how market analysts predict Caterpillar’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. See our latest analysis for Caterpillar
Market analysts’ prospects for the upcoming year seems positive, with earnings growth more than doubling. Earnings continue to grow strongly in the next couple of years, finally generating US$6.95B in 2021.
Even though it’s informative knowing the growth rate each year relative to today’s value, it may be more beneficial to gauge the rate at which the earnings are moving every year, on average. The pro of this approach is that we can get a bigger picture of the direction of Caterpillar’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 20.08%. This means that, we can expect Caterpillar will grow its earnings by 20.08% every year for the next couple of years.
Next Steps:
For Caterpillar, I’ve put together three key aspects you should look at:
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1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
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2. Valuation: What is CAT worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CAT is currently mispriced by the market.
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3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CAT? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.