CAT
CATERPILLAR INCNYSEValuation snapshot
Above bull casePrice is above even the bull case.
Price captured with valuation · Valuation Sep 5, 2026
What drives CAT's base case?
base-case thesisCaterpillar just posted a record $20.5 billion quarter and raised full-year 2026 guidance to mid-to-high-teens revenue growth, backed by a record $72 billion order backlog. This scenario takes that guidance at face value for 2026 and then assumes growth normalizes over the following years as the data-center order surge matures and the backlog is worked down, settling toward the mid-single-digit growth Caterpillar has historically delivered outside of boom years. Profitability is assumed to hold near its trailing-year average rather than staying at its recent record high, and the tax rate stays close to the 23.94% Caterpillar reported for full-year 2025.
What shapes the assumptions
Record backlog converting to revenue
order backlog ($72B, +92% YoY)
Raises revenue growth
Guidance-consistent deceleration after 2026
revenue growth guidance (mid-to-high teens for 2026)
Informs revenue growth
Power & Energy mix supporting margins near the trailing-year average
operating margin (13.9%-20.9% range over last 8 quarters)
Raises operating margin
Effective tax rate holding near FY2025 level
effective tax rate (23.94% FY2025)
Informs tax rate
Capacity investment to support backlog conversion
capex tied to backlog growth
Raises reinvestment
Each driver links a business metric to the forecast assumption it shapes — the basis for this case, not investment advice.
Why the gap?
The market is pricing this as if revenue grows 46.1% a year. Over the last 5 years it grew 8.8% a year — so the price assumes far more than it has delivered.
What else could explain it?›
- Or, holding growth steady
- the price is also consistent with a 71.1% operating margin, against the 18.0% assumed here.
- How confident is this estimate?
- Robustness 56.0/10 (Moderate) — some of any gap is our own uncertainty rather than disagreement.
- What would change the answer?
- Which assumption this valuation swings on, and by how much.
Many combinations of assumptions reproduce the same price. These are ways to read what the market might be expecting, not the market's actual view. How this is worked out
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
View details
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
Three independently researched cases generated automatically from published financials. Every assumption is justified and cited; the discount rate is computed from researched market inputs.
Company value drivers
Ranked operating metrics and the valuation assumptions they influence.
1. Total order backlog
The dollar value of unfilled customer orders, which is the clearest forward indicator of near-term revenue for a capital-goods maker with long lead times.
$72B
reported2. Quarterly operating margin
Operating income as a percent of sales and revenues each quarter, tracking whether the recent margin expansion from higher-margin power-generation mix is durable.
20.9%
reported3. Power Generation sales growth, YoY (quarterly)
Year-over-year growth in Power Generation sales, the segment most exposed to data-center genset and turbine demand, and the single biggest driver of CAT's current growth surge.
29.0%
reported4. Full-year effective tax rate
The company's actual/estimated full-year effective tax rate, which converts forecast pre-tax operating profit into after-tax cash flow in the DCF.
23.9%
reportedBase inputs from financials
source period →Base revenue (TTM)
$74.7B
Diluted shares
462,500,000
Net cash
-$20.7B
Bear
low confidence$117.77
IV / share
-85.7% vs $822.00
- Explicit cash flows
- $57.25
- Terminal value
- $105.31
- Net cash
- -$44.79
- Intrinsic value / share
- $117.77
89.4% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth13.0% → 3.0% → 0.0% → -2.0% → 1.0%low
How derived: H1 2026 revenue grew ~23% YoY and management guided FY2026 to mid-to-high-teens growth on a record backlog, but CAT's revenue fell 3.4% in 2024 and swung sharply in past cycles, so the bear case assumes FY2026 undershoots guidance and the data-center order surge decelerates into flat-to-negative growth within two years as core Construction/Resource Industries demand reverts to its historical soft-cycle pattern.
Why this confidence: Recent quarterly growth (+24% Q2 2026, +22% Q1 2026) is running far above the bear-case path ↓, Caterpillar's own history of sharp multi-year revenue declines (e.g. mid-2010s downturn) supports a conservative path ↑, 5-year horizon extends well beyond the only disclosed guidance period (FY2026) ↓
Measured by
- Total order backlog$72Breported
- Power Generation sales growth, YoY (quarterly)29.0%reported
Evidence for
- Caterpillar's full-year revenue fell 3.4% in 2024, showing the business can contract in a non-recessionary year, supporting a scenario where growth slows sharply after the current order boom.[Caterpillar 10-K FY2025 (comparative FY2024 results)]· primary
Evidence against
- Management raised full-year 2026 revenue guidance to mid-to-high-teens growth (from low-double-digits) on a record $72B backlog, up 92% YoY, suggesting more near-term durability than the bear case assumes.[Caterpillar lifts 2026 sales growth target on strong data center demand]· secondary
Operating margin15.0%medium
How derived: Quarterly operating margin ranged 13.9%-20.9% over the last eight quarters (as low as 13.9% in Q4 2025); the bear case assumes margin reverts toward the low end of this range as tariff/price-cost pressure resumes and the currently favorable Power Generation mix normalizes.
Why this confidence: Wide observed quarterly range (13.9%-20.9%) makes a single point estimate uncertain ↓, Q4 2025 print of 13.9% is a real, recent data point directly supporting the bear-case level ↑
Measured by
- Quarterly operating margin20.9%reported
Evidence for
- Operating margin was as low as 13.9% in Q4 2025, only two quarters before the 20.9% Q2 2026 peak, showing margin can swing down quickly.[Caterpillar Q4 2025 financial results]· primary
Evidence against
- Q2 2026 adjusted operating margin hit a record 21.9%, up 430 basis points YoY, driven by a structural mix shift toward high-margin data-center power generation equipment.[Caterpillar Q2 2026 earnings: Record $20.5B revenue on AI data centers]· secondary
Tax rate26.0%medium
How derived: The FY2025 effective tax rate was 23.94% per the 10-K, up from 19.7% in FY2024; the bear case extrapolates continued upward drift from unfavorable geographic mix and tax-policy risk.
Why this confidence: Tax rate is bounded by statutory/jurisdictional mix and moves gradually, giving more confidence than growth or margin estimates ↑, Only two years of comparative data (19.7% then 23.94%) are available to extrapolate a further increase from ↓
Measured by
- Full-year effective tax rate23.9%reported
Evidence for
- Caterpillar's full-year effective tax rate rose from 19.7% in 2024 to 23.94% in 2025, a trend the bear case extrapolates further.[Caterpillar tax rate trend]· secondary
Evidence against
- CAT's own Q3 2025 guidance pegged the full-year estimated effective tax rate at 24.0%, implying stability rather than a continued rise toward 26%.[Caterpillar Reports Third-Quarter 2025 Results]· primary
Reinvestment rate25.0%low
How derived: With revenue growth stalling and turning negative by year 4, the bear case assumes reinvestment needs fall well below the base case, consistent with Caterpillar's past pattern of pulling back capital spending sharply in downturns (e.g., the mid-2010s revenue contraction).
Why this confidence: No line item in Caterpillar's disclosures directly reports a 'reinvestment rate'; it is an analyst construct ↓, Directionally consistent with the low-growth bear case, which mechanically requires less capital ↑
No tracked driver measures this assumption yet.
Evidence for
- Caterpillar's individual product-line revenue nearly halved between the early-2010s mining/energy peak and 2015-2016, a period in which capital spending historically contracted sharply in downturns.[Caterpillar historical annual revenue (provided financials)]· estimate
Evidence against
- Record backlog and expanding data-center orders are currently pushing Caterpillar toward higher, not lower, capital spending, per Q2 2026 management commentary.[Caterpillar Q2 2026 slides: record $20.5B revenue, backlog soars]· secondary
Terminal growth2.0%medium
How derived: Set at roughly the long-run US inflation rate, reflecting a mature, cyclical industrial with no assumed secular tailwind persisting into perpetuity, consistent with CAT's historically volatile revenue path.
Why this confidence: Set conservatively near long-run inflation, a well-anchored macro reference point ↑, Terminal value is inherently the most distant and least verifiable part of any DCF ↓
No tracked driver measures this assumption yet.
Evidence for
- Caterpillar's revenue has been highly cyclical historically (e.g. a sharp multi-year decline in the mid-2010s), arguing for a conservative, inflation-only long-run growth assumption.[Caterpillar historical annual revenue (provided financials)]· estimate
Evidence against
- Management describes data-center power order visibility extending out to 2029-2030, which could support above-inflation structural growth rather than a purely cyclical reversion.[Caterpillar Q2 2026 earnings call read-throughs]· secondary
Base
low confidence$174.60
IV / share
-78.8% vs $822.00
- Explicit cash flows
- $69.79
- Terminal value
- $149.61
- Net cash
- -$44.79
- Intrinsic value / share
- $174.60
85.7% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth17.0% → 9.0% → 5.5% → 4.0% → 3.0%medium
How derived: Management guided FY2026 revenue growth to mid-to-high-teens on a record $72B backlog (+92% YoY, 59% shippable within 12 months); the base case takes the guidance midpoint for year one and assumes growth decelerates toward Caterpillar's historical mid-single-digit trend as the data-center order cycle matures.
Why this confidence: FY2026 growth is directly grounded in management's raised guidance (mid-to-high teens) ↑, Years 2-5 require extrapolating beyond any disclosed guidance ↓, Backlog of $72B (+92% YoY) gives concrete near-term shipment visibility ↑
Measured by
- Total order backlog$72Breported
- Power Generation sales growth, YoY (quarterly)29.0%reported
Price implies: 46.1% vs our 7.7% — one of several sets that fit this price
Evidence for
- Caterpillar raised full-year 2026 revenue growth guidance to mid-to-high-teens on a record $72B backlog (+92% YoY), with 59% expected to ship within 12 months.[Caterpillar lifts 2026 sales growth target on strong data center demand]· secondary
Evidence against
- Caterpillar's revenue fell 3.4% in 2024, illustrating that even recent non-recessionary years produced outright declines, so extrapolating guidance-based growth into later forecast years is not guaranteed.[Caterpillar 10-K FY2025 (comparative FY2024 results)]· primary
Operating margin18.0%high
How derived: Quarterly operating margin over the trailing four quarters (Q3 2025-Q2 2026) averaged roughly 18%, with a 20.9% high in Q2 2026; the base case assumes margin settles near this trailing-year average as the current record mix moderates modestly.
Why this confidence: Trailing four-quarter average is a directly computable, well-grounded reference point ↑, Recent margin has been volatile quarter to quarter (13.9% to 20.9%) ↓
Measured by
- Quarterly operating margin20.9%reported
Price implies: 71.1% vs our 18.0% — one of several sets that fit this price
Evidence for
- Quarterly operating margin averaged roughly 18% over the trailing four quarters through Q2 2026 (13.9%-20.9% range), supporting an 18% base-case assumption.[Caterpillar Q1 2026 10-Q]· primary
Evidence against
- Margin hit a record 21.9% (adjusted) in Q2 2026, above the 18% base-case level, so the base case may understate near-term profitability if the mix shift persists.[Caterpillar Q2 2026 earnings]· secondary
Tax rate24.0%high
How derived: The FY2025 effective tax rate was 23.94% per the 10-K; the base case holds this rate roughly flat going forward.
Why this confidence: FY2025 rate (23.94%) is a single, clean, recently reported full-year figure directly from the 10-K ↑, Tax rate moved over 4 points in a single year (2024 to 2025), showing it isn't fully stable ↓
Measured by
- Full-year effective tax rate23.9%reported
Evidence for
- Caterpillar's FY2025 effective tax rate was 23.94% per its 10-K, directly supporting a 24% base-case rate.[Caterpillar 10-K FY2025]· primary
Evidence against
- The effective tax rate was only 19.7% in FY2024, one year prior, showing the rate can move several points year to year and may not stay flat at 24%.[Caterpillar tax rate trend]· secondary
Reinvestment rate35.0%low
How derived: Record backlog growth ($72B, +92% YoY) implies continued investment in engine/turbine capacity; the base case assumes moderate reinvestment intensity consistent with the assumed mid-single-digit terminal growth.
Why this confidence: No explicit reinvestment-rate disclosure exists; this is an analyst estimate ↓, Backlog growth gives a directional, though not quantified, signal for capacity investment needs ↑
No tracked driver measures this assumption yet.
Evidence for
- Backlog grew $9B sequentially and 92% YoY to a record $72B in Q2 2026, implying Caterpillar needs continued capacity investment to convert it into shipped revenue.[Caterpillar Q2 2026 slides: record $20.5B revenue, backlog soars]· secondary
Evidence against
- No standalone company disclosure isolates the specific reinvestment rate needed for backlog conversion, so the 35% base-case level is an analyst estimate rather than a directly reported figure.[Caterpillar Q2 2026 10-Q]· estimate
Terminal growth2.5%medium
How derived: Set slightly above long-run US inflation, consistent with CAT's positioning as a global industrial-equipment leader with a modest structural growth tailwind from electrification and infrastructure spend, but without assuming the current AI/data-center order wave becomes permanent.
Why this confidence: Set modestly above inflation, consistent with a mature industrial with only a slight structural tailwind assumed ↑, Terminal assumptions are unverifiable until decades pass ↓
No tracked driver measures this assumption yet.
Evidence for
- CAT revenue grew from $50.97B (2021) to $67.59B (2025), a multi-year compound rate above inflation, supporting a modest above-inflation terminal growth assumption.[Caterpillar historical annual revenue (provided financials)]· primary
Evidence against
- Revenue declined outright in 2024 (-3.4%), showing the multi-year uptrend is not linear, so even a modest above-GDP terminal rate carries some optimism for a mature, cyclical equipment maker.[Caterpillar 10-K FY2025 (comparative FY2024 results)]· primary
Bull
low confidence$222.91
IV / share
-72.9% vs $822.00
- Explicit cash flows
- $77.96
- Terminal value
- $189.74
- Net cash
- -$44.79
- Intrinsic value / share
- $222.91
85.1% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth19.0% → 15.0% → 10.0% → 7.0% → 5.0%low
How derived: Power Generation sales grew 29% YoY in Q2 2026 and management cited order visibility extending into 2029-2030; the bull case assumes the AI/data-center power cycle sustains high-teens/low-double-digit growth for several more years before decelerating toward a still-elevated long-run rate.
Why this confidence: Backlog visibility into 2029-2030 and 29% Power Generation growth support an extended high-growth path ↑, Relies on a single external demand driver (AI/data-center capex) continuing uninterrupted for 5 years ↓, CAT's own history shows past demand booms (e.g. the mining supercycle) eventually decelerated sharply ↓
Measured by
- Total order backlog$72Breported
- Power Generation sales growth, YoY (quarterly)29.0%reported
Evidence for
- Power Generation sales grew 29% YoY in Q2 2026 on data-center demand, and management cited order visibility extending into 2029-2030.[Caterpillar sales surpass $20B as data center generators take off]· secondary
Evidence against
- Caterpillar's revenue fell 3.4% in 2024 and has a history of multi-year contractions, so sustaining double-digit growth for multiple years would be a break from its typical cyclical pattern.[Caterpillar 10-K FY2025 (comparative FY2024 results)]· primary
Operating margin21.0%medium
How derived: Q2 2026 adjusted operating margin hit a record 21.9% (+430bps YoY) as Power & Energy mix shifted toward high-margin data-center gensets and turbines; the bull case assumes this record margin level is sustained as the mix shift persists.
Why this confidence: The record 21.9% margin was actually achieved in Q2 2026, not merely hypothetical ↑, Only one quarter has reached this level; its durability is unproven ↓
Measured by
- Quarterly operating margin20.9%reported
Evidence for
- Adjusted operating margin reached a record 21.9% in Q2 2026, up 430bps YoY, driven by favorable price realization and a high-margin data-center equipment mix.[Caterpillar Q2 2026 earnings]· secondary
Evidence against
- Operating margin was only 13.9% in Q4 2025, just two quarters earlier, showing the 21.9% level may be a peak rather than a sustainable new normal.[Caterpillar Q4 2025 financial results]· primary
Tax rate22.0%medium
How derived: The FY2024 effective tax rate was 19.7%, below the FY2025 rate of 23.94%; the bull case assumes a return toward this more favorable historical rate on favorable geographic/product mix.
Why this confidence: 19.7% FY2024 rate shows this low a level has occurred within the last two years ↑, The rate moved in the opposite direction (up, not down) in the most recently reported year (FY2025) ↓
Measured by
- Full-year effective tax rate23.9%reported
Evidence for
- Caterpillar's effective tax rate was 19.7% in FY2024, below the bull-case 22% assumption, showing a rate this low has occurred recently.[Caterpillar tax rate trend]· secondary
Evidence against
- The rate rose to 23.94% in FY2025 per the 10-K, the opposite direction from the bull case's assumed decline to 22%.[Caterpillar 10-K FY2025]· primary
Reinvestment rate45.0%low
How derived: Sustained double-digit growth and multi-year order visibility into 2029-2030 require heavier capacity investment (new engine/turbine capacity); the bull case assumes a higher reinvestment intensity to fund that growth.
Why this confidence: Qualitatively consistent with management's commentary on extending capacity for a multi-year demand cycle ↑, No specific disclosed capex target validates the precise 45% figure ↓
No tracked driver measures this assumption yet.
Evidence for
- Management indicated order visibility into 2029-2030 for data-center power generation, implying a need for sustained capacity expansion to meet demand.[Caterpillar Q2 2026 earnings call read-throughs]· secondary
Evidence against
- No specific multi-year capex plan tied to a 45% reinvestment rate has been disclosed by Caterpillar; the figure is an analyst estimate calibrated to the assumed growth rate rather than a reported target.[Caterpillar Q2 2026 10-Q]· estimate
Terminal growth3.0%low
How derived: Assumes CAT captures a structural, multi-year increase in electrical-power-generation equipment demand (data centers, electrification, reshoring) that lifts its terminal growth rate toward nominal long-run US GDP growth, above the inflation-only floor used in the other cases.
Why this confidence: Order visibility to 2029-2030 is a real disclosed data point supporting some structural uplift ↑, A 3% terminal growth rate assumes a cyclical industrial permanently grows faster than long-run US GDP, an aggressive and largely unproven assumption ↓
No tracked driver measures this assumption yet.
Evidence for
- Management cited data-center power order visibility extending into 2029-2030, supporting the case for a structurally higher long-run growth rate tied to electrification/AI power demand.[Caterpillar Q2 2026 slides: record $20.5B revenue, backlog soars]· secondary
Evidence against
- A 3% terminal growth rate for a mature, historically cyclical industrial equipment maker implies the current AI/data-center demand wave becomes a permanent structural feature rather than a multi-year cycle, which is not yet proven over a full cycle.[Caterpillar historical annual revenue (provided financials)]· estimate
Valuation robustness
reliability of the estimate, not a stock rating56 / 100 · Moderate
Formula v1.0.0. Higher means a more reliable estimate — not a recommendation.
Quality checks
Automated model-risk flags — warnings, not recommendations.
- 86% of the intrinsic value rests on the terminal value — a small change to terminal growth moves the valuation a lot.→ terminal growth
- The reinvestment assumption is low-confidence.→ reinvestment
Per-share economics
Business growth after changes in the diluted share count.
| Period | Revenue growth | FCF/share | FCF/share growth | Shares | Share growth |
|---|---|---|---|---|---|
| Q3 2024 | -4.2% | 6.42 | -10.6% | 486.7M | -5.1% |
| Q1 2025 | -9.8% | 1.21 | -61.1% | 477.1M | -4.0% |
| Q2 2025 | -0.7% | 5.44 | -0.6% | 471.5M | -3.7% |
| Q3 2025 | 9.5% | 6.54 | 1.9% | 470.8M | -3.3% |
| Q1 2026 | 22.2% | 2.45 | 102.0% | 465.8M | -2.4% |
| Q2 2026 | 24.0% | 8.18 | 50.3% | 462.5M | -1.9% |
Valuation history every run
History builds as the valuation is recalculated — this is the first recorded run.
Market inputs researched
The 10-year US Treasury yield closed at approximately 4.78% on Sept 4, 2026, used directly as the risk-free rate for CAPM.
Yahoo Finance reports a 5-year monthly beta of 1.59 for CAT, reflecting its above-market volatility as a cyclical capital-goods manufacturer.
Damodaran's start-of-2026 implied US equity risk premium was 4.23% over the Treasury bond rate, used as the market ERP input to CAPM.
stockanalysis.com quoted CAT shares around $822, with a market cap snapshot dated Aug 28, 2026.
Generated 9/5/2026, 4:44:47 PM · pipeline v1.2.0