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Caterpillar Inc. (NYSE:CAT) saw significant share price movement during recent months on the NYSE, rising to highs of US$363 and falling to the lows of US$317. 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 US$348 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.
View our latest analysis for Caterpillar
What Is Caterpillar Worth?
Good news, investors! Caterpillar is still a bargain right now. According to our valuation, the intrinsic value for the stock is $447.51, but it is currently trading at US$348 on the share market, meaning that there is still an opportunity to buy now. 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 kind of growth will Caterpillar generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with a negative profit growth of -6.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Caterpillar. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although CAT is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to CAT, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on CAT for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you'd like to know more about Caterpillar as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Caterpillar (1 is significant) you should be familiar with.