Caterpillar Inc. (NYSE:CAT) stock price has seen significant price movements over the past few months on the NYSE, rising to highs of $363 and falling to lows of $317. Some price action can provide investors with a better opportunity to enter the stock and potentially buy it at a lower price. One question to answer is whether Caterpillar’s current trading price of $342 reflects the actual value of the large-cap stock. Or is it currently undervalued, giving us a buying opportunity? Let’s take a look at Caterpillar’s outlook and value based on the latest financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Caterpillar
What is Caterpillar worth?
Great news for investors – Caterpillar is still trading at a relatively cheap price. Our valuation model shows that the intrinsic value of the stock is $447.02, which is above the current market valuation of the company. This indicates a potential opportunity to buy cheap. More interestingly, Caterpillar’s share price is quite volatile, which gives us further buying opportunities as the share price could fall even further (or rise further) in the future. This is based on its high beta, which is a good indicator of how much the stock moves relative to the rest of the market.
What kind of growth will Caterpillar generate?
Investors looking for growth in their portfolio should check out a company’s prospects before buying its shares. Buying a great company with robust prospects at a cheap price is always a good investment. So let’s also take a look at the company’s future expectations. However, in the case of Caterpillar, it is expected to post negative earnings growth of -6.4%, which doesn’t exactly help support its investment thesis. It seems that the risk of future uncertainty is high, at least in the short term.
What this means for you
Are you a shareholder? Although CAT is currently undervalued, the negative outlook brings with it some uncertainty, which means higher risk. Consider whether you want to increase your portfolio exposure to CAT or whether diversifying into another stock would be better for your overall risk and return.
Are you a potential investor? If you have been keeping an eye on CAT for some time but are hesitant to make the move, we recommend that you take a closer look at the stock. Given the current undervaluation, now is a good time to make a decision. However, keep in mind the risks associated with negative growth prospects in the future.
With this in mind, we would not consider investing in a stock unless we knew exactly what risks were involved. Caterpillar, for example, has 3 warning signs (and 1 that is possibly serious) that we think you should know about.
If you are no longer interested in Caterpillar, you can view our list of over 50 other stocks with high growth potential on our free platform.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
