Caterpillar Inc. (CAT) Stock Valuation — DCF Analysis
Agricultural - Machinery · NYSE
Current Price
$910.57
Intrinsic Value
$943.3
+3.5% margin of safety
COMPETITIVE MOAT
↑Brand and Dealer Network
Caterpillar's iconic brand commands strong customer loyalty. Its extensive global dealer network provides unparalleled service and support, creating a significant barrier to entry for competitors.
↑Economies of Scale
Massive production volumes allow Caterpillar to achieve significant cost advantages in manufacturing and procurement. This scale is difficult for smaller rivals to replicate, enhancing pricing power.
↑Data Center Power Solutions
Surging demand for data center power infrastructure positions Caterpillar for durable growth. Their established expertise in power generation and distribution is a key differentiator in this expanding market.
INVESTMENT RISKS
↓Cyclical Industry Dependence
The company's performance is heavily tied to global economic cycles and infrastructure spending. Downturns in construction and mining can significantly impact demand for its machinery.
↓Regulatory and Trade Policy
Changes in trade policies, tariffs, and environmental regulations can impact manufacturing costs and market access. Political shifts, like potential tariff changes, introduce uncertainty.
↓Intensifying Competition
While strong, Caterpillar faces increasing competition from both established players and emerging manufacturers, particularly in developing markets. This can pressure margins and market share.
Base case
CAT base case valuation
A base case discounted cash flow model for CAT estimates an intrinsic value of about $943.3 per share, against a current price of $910.57. The model assumes 11.9% annual free cash flow growth, a 10.0% discount rate, and a 30x exit multiple.
Intrinsic Value
$943.3
Margin of safety
+3.5%
Expected annual return
+0.7%
Base case assumptions: 11.9% annual growth, 10.0% discount rate, 30x exit multiple, 5 year projection. Data as of 2026-06-12.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the CAT valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for Caterpillar Inc. respond.
Open DCF Calculator for CATCompany Overview
Caterpillar Inc., a global enterprise founded in 1925 and headquartered in Deerfield, Illinois (having previously operated as Caterpillar Tractor Co. until its rebranding in 1986), is a premier manufacturer and vendor of heavy construction and mining equipment, diesel and natural gas power units, and industrial gas turbines across the world. The company's extensive offerings are organized into several operational divisions: Construction Industries: This segment delivers a broad spectrum of machinery for construction projects, including asphalt pavers, versatile backhoe and skid steer loaders, various sizes of excavators (from compact to heavy-duty), compactors, road-building equipment like cold planers and motorgraders, pipelayers, site preparation tractors, telehandlers, and utility vehicles, alongside a range of wheel loaders and track-type equipment. Resource Industries: Dedicated to the mining sector, this division supplies powerful equipment such as electric rope and hydraulic shovels, draglines, rotary drills, specialized hard rock vehicles, and a diverse fleet of mining, off-highway, and articulated trucks. It also offers longwall miners, wheel dozers, fleet management systems, autonomous vehicle solutions, crucial machinery components, selected work tools, and comprehensive safety and performance solutions for mining operations. Energy & Transportation: This segment focuses on power generation and propulsion systems. It provides reciprocating engines, generator sets, integrated power solutions, industrial turbines and associated services, remanufactured engines and parts, centrifugal gas compressors, and diesel-electric locomotives with related components and services. These products serve critical sectors including marine, oil and gas, industrial applications, and electric power generation. Financial Products: This segment supports customers with a variety of financial services, such as operating and finance leases, installment sale agreements, working capital loans, and wholesale financing schemes. It also offers insurance and risk management products tailored for vehicles, power generation facilities, and marine vessels. All Other: This encompassing segment is responsible for manufacturing essential consumables and components like filters, fluids, undercarriage parts, and ground engaging tools.
Financial Metrics — CAT Stock Valuation Data
Revenue/Share (TTM)
$152.69
FCF/Share (TTM)
$24.71
ROIC (TTM)
12.4%
ROE (TTM)
47.5%
P/FCF
36.6x
EV/EBITDA
28.8x
FCF Yield
2.73%
Debt/Equity
2.31x
Based on trailing twelve-month data, CAT shows a free cash flow per share of $24.71 and a ROIC of 12.4%, key inputs for stock valuation using the DCF method. The P/FCF ratio of 36.6x and FCF yield of 2.73% are important context metrics when evaluating CAT's stock valuation relative to peers.
Frequently Asked Questions
What is the intrinsic value of CAT?
Caterpillar Inc. currently generates $24.71 in free cash flow per share. At the current price of $910.57, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is CAT undervalued?
CAT trades at a P/FCF ratio of 36.6x with a free cash flow yield of 2.73%. This P/FCF is in a moderate range. However, whether CAT is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value CAT stock using DCF?
To perform a DCF valuation on Caterpillar Inc.: (1) Start with the trailing free cash flow per share ($24.71) as the base, (2) project future FCF growth over 5-10 years based on Agricultural - Machinery industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting CAT's risk profile — with a debt-to-equity of 2.31x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to CAT?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For Caterpillar Inc., this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Agricultural - Machinery trends, then discounting those amounts to today's dollars. CAT's ROIC of 12.4% shows moderate capital returns.
How does WACC affect CAT stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For CAT, with a debt-to-equity ratio of 2.31x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 28.8x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See CAT PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Industrials valuationsDCF and P/E value CAT with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2026-06-12. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.