Caterpillar Inc. (CAT) Stock Valuation — PE Analysis
Agricultural - Machinery · NYSE
Current Price
$813.83
PE Ratio (TTM)
34.9x
Intrinsic Value
$976.54
+16.7% margin of safety
COMPETITIVE MOAT
↑Brand and Dealer Network Strength
Caterpillar's iconic brand commands strong customer loyalty. Its extensive global dealer network provides unparalleled service and support, creating high switching costs for customers.
↑Economies of Scale in Manufacturing
Massive production volumes allow Caterpillar to achieve significant cost advantages in manufacturing. This scale makes it difficult for smaller competitors to match pricing and profitability.
↑Technological Leadership and R&D
Continuous investment in research and development drives innovation in heavy machinery. This leads to proprietary technologies and advanced product features that competitors struggle to replicate.
INVESTMENT RISKS
↓Cyclicality of End Markets
Demand for Caterpillar's products is highly sensitive to global economic cycles, particularly in construction and mining. Downturns can significantly impact sales and profitability.
↓Geopolitical and Trade Uncertainties
Global operations expose Caterpillar to risks from trade disputes, tariffs, and political instability. These factors can disrupt supply chains and affect international sales.
↓Commodity Price Volatility
Fluctuations in the prices of raw materials like steel and energy directly impact Caterpillar's manufacturing costs. Extreme volatility can squeeze margins if not effectively managed.
Base case
CAT base case PE valuation
A base case PE valuation for CAT estimates a fair value of about $976.54 per share, against a current price of $813.83. The model assumes 11.1% annual earnings growth, a 34.59x target PE multiple, and a 10% discount rate.
Intrinsic Value
$976.54
Margin of safety
+16.7%
Expected annual return
+3.7%
Base case assumptions: 11.1% annual earnings growth, 34.59x target PE, 10% discount rate, 5 year projection. Data as of 2026-10-07.
This base case uses default assumptions and is not financial advice. The fair value changes significantly when the target PE or earnings growth rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the CAT PE valuation
Adjust the target PE, earnings growth, and discount rate to see how the fair value and margin of safety for Caterpillar Inc. respond.
Open PE 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 PE Stock Valuation Data
PE Ratio (TTM)
34.9x
PEG Ratio
1.92
Earnings Yield
2.89%
ROE (TTM)
54.1%
Revenue/Share (TTM)
$162.31
Dividend Yield
0.76%
Debt/Equity
2.33x
Frequently Asked Questions
What is the PE ratio of CAT?
The trailing twelve-month PE ratio of CAT reflects how much investors pay per dollar of Caterpillar Inc.'s earnings. This metric is most useful when compared to Agricultural - Machinery peers and the company's own historical range.
Is CAT overvalued based on PE ratio?
CAT's PE of 34.9x combined with a PEG ratio of 1.92 provides a growth-adjusted perspective. A PEG near 1.0 means the P/E is roughly in line with the earnings growth rate. Keep in mind that PE-based valuation works best for profitable, mature companies — for high-growth or cyclical Agricultural - Machinery, a DCF analysis may be more appropriate.
How do I value CAT stock using PE ratio?
To value Caterpillar Inc. using PE: (1) Compare the current PE (34.9x) against the Agricultural - Machinery median to assess relative pricing, (2) check the PEG ratio (1.92) to adjust for growth expectations, (3) review the 5-year PE range to identify where the stock sits historically, and (4) estimate fair value by multiplying a target PE by forward EPS estimates. This relative approach complements DCF's absolute valuation.
What is the PEG ratio of CAT?
CAT's PEG ratio is 1.92, calculated by dividing the PE ratio (34.9x) by the expected earnings growth rate. A PEG near 1.0 means the P/E is roughly in line with the expected earnings growth rate. Note that PEG accuracy depends on the reliability of growth estimates.
Should I use PE ratio or DCF for CAT stock valuation?
PE ratio gives a quick relative read — how CAT is priced versus Agricultural - Machinery peers. DCF provides an absolute value based on projected free cash flows. For CAT, with a strong ROE of 54.1%, both methods are worth using — PE for a market-relative check, DCF to stress-test whether fundamentals justify the price. Each method has blind spots: PE ignores capital structure and cash flow quality, while DCF is sensitive to growth and discount rate assumptions.
Learn More
- See CAT DCF Valuation → — Intrinsic value via Discounted Cash Flow analysis
- PE Methodology — Step-by-step guide to PE ratio stock valuation
- DCF Methodology — Guide to discounted cash flow analysis
- PE Ratio — Understanding the price-to-earnings ratio
- Intrinsic Value — How to evaluate stock fair value
Related PE Valuations
All Industrials valuationsP/E and DCF value CAT with different methods and assumptions, so the two conclusions can differ. Compare the DCF intrinsic value.
Price as of 2026-10-07. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.