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Caterpillar (CAT) is back in focus after quarterly results highlighted record sales and outperformance in its Power & Energy segment, which is tied closely to large AI data center projects and supported by a record backlog for future activity.
See our latest analysis for Caterpillar.
The latest earnings and AI data center wins have fed directly into the share price, with Caterpillar’s 1-month share price return of 21.74% and 1-year total shareholder return of 102.32% pointing to strong momentum that the market currently associates with its long-term power and infrastructure story.
If Caterpillar’s AI power angle has caught your eye, this could be a good moment to see what else is riding the same theme through our 33 AI infrastructure stocks.
After such a sharp move and with the share price sitting above the average analyst target and implied intrinsic value, the key question is whether Caterpillar still offers an attractive entry point or if the market is already pricing in years of future growth.
Caterpillar last closed at $726.20 while the most followed narrative fair value sits at $338.56, a wide gap that frames the current debate around the stock.
I assume an average revenue growth of 7.01% per year. This is significantly slower than the 17% growth in the last 12 months and is closer to the expected growth rate for an established company. While I expect cyclicality in the next 5 years, I think that the 7.01% rate is a reasonable average, which will lift the revenue baseline mostly due to inflation as well as government incentivized spending in construction. CAT will benefit from government spending across all segments, but mostly in construction as companies increase the machinery commits for new projects. This leads to my estimated revenue of $87B for 2028.
Read the complete narrative.
Want to see how steady revenue assumptions, profit margins and a future earnings multiple all stack up into that $338.56 figure? The full narrative by Goran_Damchevski walks through the trade off between government backed demand, buybacks and a more cautious long term growth path, and ties it directly to the fair value line he has drawn.
Result: Fair Value of $338.56 (OVERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, that narrative could be knocked off course if infrastructure spending slows or if lower margin competitors pressure Caterpillar’s pricing power and profitability assumptions.
Find out about the key risks to this Caterpillar narrative.
If you see the numbers differently or want to stress test your own assumptions, you can build a complete Caterpillar story yourself in just a few minutes, starting with Do it your way.
A great starting point for your Caterpillar research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include CAT.
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