Caterpillar Inc. (CAT) Stock Analysis — Fair Value, Risk & Moat Rating
NYQ · Industrials · Farm & Heavy Construction Machinery
Is Caterpillar Inc. a safe investment right now?
Caterpillar Inc.'s Altman Z-Score of 5.67 places it in the safe zone. Our DCF model estimates intrinsic value at $325.23, suggesting the stock is overvalued by 145%. Moat rating: 2.3/5 stars.
Could Caterpillar Inc. go bankrupt? Altman Z-Score analysis
Z-Score of 5.67 is above 3.0, indicating the company is financially healthy by this metric.
- Below 1.8 — Distress Zone (high bankruptcy risk)
- 1.8 to 3.0 — Gray Zone (elevated uncertainty)
- Above 3.0 — Safe Zone (financially healthy)
What drives CAT's Z-Score?
| Component | Formula | Value | Weight | Contribution |
|---|---|---|---|---|
| A · Working Capital / Total Assets | WC / TA | 0.1528 | 1.2 | 0.18 |
| B · Retained Earnings / Total Assets | RE / TA | 0.6763 | 1.4 | 0.95 |
| C · EBIT / Total Assets | EBIT / TA | 0.1477 | 3.3 | 0.49 |
| D · Market Cap / Total Liabilities | MCap / TL | 5.4729 | 0.6 | 3.28 |
| E · Revenue / Total Assets | Rev / TA | 0.7641 | 1.0 | 0.76 |
How has CAT's financial health changed over time?
| Year | Z-Score | Zone |
|---|---|---|
| 2016 | 4.9 | Safe |
| 2017 | 4.98 | Safe |
| 2018 | 4.76 | Safe |
| 2019 | 4.95 | Safe |
| 2020 | 5.37 | Safe |
| 2021 | 5.44 | Safe |
| 2022 | 4.93 | Safe |
| 2023 | 5.22 | Safe |
| 2024 | 5.26 | Safe |
| 2025 | 5.67 | Safe |
Source: Calculated from CAT's latest 10-K filing on SEC EDGAR.
What could Caterpillar Inc. be worth? (High Uncertainty)
Fair value range: $276.73 — $345.95
Valuation Methods Used
| Method | Fair Value | Weight | Detail |
|---|---|---|---|
| Historical PE × Forward EPS | $345.95 | 50% | 15.4x avg PE (4 years) × $22.46 forward EPS |
| DCF (Discounted Cash Flow) | $323.03 | 30% | Two-stage DCF: $5.8B TTM FCF, 20.0% growth, 11.7% WACC |
| EV/FCF Multiple | $276.73 | 20% | TTM FCF × 28x multiple + net cash |
Assumptions & Data Sources
| Parameter | Value | Source |
|---|---|---|
| FCF Growth Rate (Stage 1) | 20.0% | 70% analyst consensus + 30% historical |
| Analyst EPS Growth (This Year) | 20.4% | Consensus (26 analysts) |
| Analyst EPS Growth (Next Year) | 21.4% | Consensus |
| Historical 5Y FCF CAGR | 17.8% | SEC EDGAR |
| Terminal Growth Rate | 2.5% | Long-term GDP proxy |
| Discount Rate (WACC) | 11.7% | CAPM (Rf=4.3% + 1.52*5.5%) |
| Net Cash / (Debt) | $-34,725M | Balance sheet |
| Base FCF (TTM) | $5.8B | Trailing 12 months |
| Shares Outstanding | 465,287,332 | Latest |
Sensitivity Analysis
| Growth Rate | 8% WACC | 10% WACC | 11.7% WACC | 13% WACC |
|---|---|---|---|---|
| 0% | $202.01 | $149.28 | $122.42 | $107.71 |
| 2.5% | $233.86 | $171.50 | $139.81 | $122.50 |
| 5.0% | $270.41 | $196.89 | $159.62 | $139.30 |
| 7.5% | $320.27 | $230.96 | $185.85 | $161.34 |
Free Cash Flow History
| Year | FCF | Growth |
|---|---|---|
| 2020 | $5.3B | — |
| 2021 | $5.9B | +10.9% |
| 2022 | $5.3B | +-8.7% |
| 2023 | $6.1B | +14.1% |
| 2024 | $6.5B | +6.0% |
| 2025 | $11.3B | +74.5% |
Source: FCF data from SEC EDGAR filings. Price via Yahoo Finance.
Does Caterpillar Inc. have a durable competitive advantage?
Moat rating: 2.3/5.
What makes up CAT's moat score?
ROIC Stability
ROIC variability over the past decade. Score: 2/5.
Gross Margin Trend
Gross margin trajectory over the past decade. Score: 4/5.
Switching Costs
Estimated customer lock-in based on margin level. Score: 1/5.
How stable is CAT's return on invested capital?
| Year | ROIC | Trend |
|---|---|---|
| 2016 | 5.7% | — |
| 2017 | 7.2% | Rising |
| 2018 | 2.4% | Declining |
| 2019 | 8.9% | Rising |
| 2020 | 16.0% | Rising |
| 2021 | 15.8% | Stable |
| 2022 | 8.6% | Declining |
| 2023 | 13.6% | Rising |
| 2024 | 15.0% | Rising |
| 2025 | 23.4% | Rising |
Source: ROIC calculated from SEC EDGAR filings.
Is Caterpillar Inc.'s dividend safe?
Can Caterpillar Inc. afford its dividend?
Payout ratio is 31.1%. FCF covers the dividend 3.3x. 53 consecutive years of payments.
Caterpillar Inc.'s key financial metrics
| Metric | Latest | 1Y Ago | 3Y Ago | Trend |
|---|---|---|---|---|
| Revenue | $67.1B | $59.4B | $41.7B | Rising |
| Net Income | $3.6B | $3.5B | N/A | — |
| Free Cash Flow | $11.3B | $6.5B | $5.3B | Rising |
| Gross Margin | 6.8% | 7.9% | 4.2% | Rising |
Common questions about Caterpillar Inc.
Is Caterpillar Inc. at risk of going bankrupt?
Caterpillar Inc.'s Altman Z-Score of 5.67 places it in the safe zone. This metric uses balance sheet ratios to predict bankruptcy probability within 2 years. A score below 1.8 signals distress, while above 3.0 indicates safety.
What is Caterpillar Inc.'s intrinsic value based on DCF?
Our DCF model estimates Caterpillar Inc.'s intrinsic value at $325.23 per share. The current margin of safety is -145.5%. This estimate is based on historical free cash flow trends and a risk-adjusted discount rate.
Does Caterpillar Inc. have a competitive moat?
Caterpillar Inc. receives a moat rating of 2.3 out of 5 stars, based on ROIC stability, gross margin trends, and estimated switching costs. A rating above 3.5 suggests a durable competitive advantage.
Is Caterpillar Inc.'s dividend safe?
Our dividend safety analysis examines payout ratio, free cash flow coverage, and the company's streak of consecutive dividend payments to determine whether the current payout is sustainable.
Before you invest in Caterpillar Inc., make sure you truly understand it.
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FairValueLabs Disclaimer
All valuations, scores, ratings, and classifications on this page are produced by the FairValueLabs internal valuation system. They do not represent actual market value, guaranteed outcomes, or professional investment advice. These are analytical estimates for educational and research purposes only.
This is not financial advice. All data is sourced from SEC EDGAR public filings. Always consult a qualified financial advisor before making investment decisions.
Last updated: Apr 20, 2026. Data sources: SEC EDGAR (financial statements), Yahoo Finance (market data, analyst consensus). Data may not reflect the most recent quarter.
CAT analysis methodology: How we calculate fair value, Z-Scores, and moat ratings