May 18, 2023
Top 10 Stock Caterpillar Hold Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Caterpillar – Top 10 Stock in SDG 14: Life Below Water
Caterpillar is listed as a top 10 stock on May 18, 2023 in the market index SDG 14 because of its high performance in at least one of the Obermatt investment strategies. While only half of the consolidated Obermatt Ranks exhibit above-average performance and professional market sentiment is positive, it may be a solid investment proposition, especially if a growth recovery is to be expected soon. Based on the Obermatt 360° View of 40 (40% performer), Obermatt assesses an overall hold recommendation for Caterpillar on May 18, 2023.
Snapshot: Obermatt Ranks
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° Assessment Caterpillar Hold
| 360 METRICS | May 18, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 58 |
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| GROWTH | ||||||||
| GROWTH | 25 |
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| SAFETY | ||||||||
| SAFETY | 21 |
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| SENTIMENT | ||||||||
| SENTIMENT | 74 |
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| 360° VIEW | ||||||||
| 360° VIEW | 40 |
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ANALYSIS: With an Obermatt 360° View of 40 (better than 40% compared with alternatives), overall professional sentiment and engagement for the stock Caterpillar are below the industry average. The 360° View is based on consolidating four consolidated indicators, with half the metrics below and half above average for Caterpillar. The consolidated Value Rank has an attractive rank of 58, which means that the share price of Caterpillar is on the lower side compared with typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is lower than for 58% of alternative stocks in the same industry. The consolidated Sentiment Rank has a good rank of 74, which means that professional investors are more optimistic about the stock than for 74% of alternative investment opportunities. But the consolidated Growth Rank has a low rank of 25, which means that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. The consolidated Safety Rank has a riskier rank of 21, meaning the company has a riskier financing structure than 79 comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. ...read more
RECOMMENDATION: With a 360° View of 40, Caterpillar is worse than 60% of all alternative stock investment opportunities based on the Obermatt Method. Half of the consolidated Obermatt Ranks exhibit above-average performance, but the other half are below market levels. The company enjoys a good value (Value Rank of 58) and positive market sentiment in the professional investor community (Sentiment Rank of 74), but growth expectations are below-average (Growth Rank of 25) and the financing structure is on the risky side(Safety Rank of 21). This combination is rather dangerous, because high debt levels (low safety) require growth to finance the debt burden. The current low growth level may be temporary, because professionals are actually optimistic (high sentiment). Good value is sometimes an indication that the company's future is challenging. The below-par growth performance may be the reason for this assessment. Companies with less growth typically have a lower price than fast-growing competitors. Even though professional investor sentiment is strong, we recommend further evaluating whether the future of Caterpillar is as challenging as the stock's low price suggests. Since the professional community is optimistic, the stock might just be going through a more challenging phase now, indicating that timing might be good now. ...read more
Sentiment Strategy: Professional Market Sentiment for Caterpillar positive
ANALYSIS: With an Obermatt Sentiment Rank of 74 (better than 74% compared with alternatives), overall professional sentiment and engagement for the stock Caterpillar is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Caterpillar. Analyst Opinions are at a rank of 22 (worse than 78% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. But they are changing their opinions! Analyst Opinions Change has a rank of 92, which indicates a shift in stock research experts opinions for the better. In other words, they are getting more optimistic about stock investments in Caterpillar. Even better, the Professional Investors rank is 90, meaning that professional investors hold more stock in this company than in 90% of alternative investment opportunities. Pros tend to favor investing in this company. Furthermore, Market Pulse has a rank of 67, which means that the current professional news and professional social networks are upbeat when discussing this company (more positive news than for 67% of competitors). ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 74 (more positive than 74% compared with investment alternatives), Caterpillar has a reputation among professional investors that is above-average compared with that of its competitors. While analysts are still critical of the company, some are changing their minds. In addition, the professional news channels are optimistic, and many institutional investors have already bought stock in the company. These are encouraging signals, despite the still lower level of analyst recommendations. They may be due to a problematic past, and about to change. The positive sentiment signals are stronger than the negative. ...read more
Value Strategy: Caterpillar Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 58 (better than 58% compared with alternatives), Caterpillar shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Caterpillar. Price-to-Profit (also referred to as price-earnings, P/E) is 80 which means that the stock price compared with what market professionals expect for future profits is lower than for 80% of comparable companies, indicating a good value concerning Caterpillar's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with an Price-to-Book Rank of 11, which means that the stock price is lower compared with invested capital than for 11% of comparable investments. On the other hand, Price-to-Sales is less favorable than 66% of alternatives (only 34% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 14% of comparable companies, making the stock more expensive compared with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 58, is a BUY recommendation based on Caterpillar's stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high in respect to expected revenues, it means that the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than pay it out to shareholders, thus sealing the company's fate early. This needs to be investigated, and the company's optimism verified before deciding to buy the stock. ...read more
Growth Strategy: Caterpillar Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 25 (better than 25% compared with alternatives), Caterpillar shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four metrics below average for Caterpillar. While Profit Growth has a good rank of 67, as professionals currently expect the company to grow its profits more than 67% of its competitors, all other growth indicators are below market averages. Sales Growth has a rank of 14, which means that currently professionals expect the company to grow less than 86% of its competitors, while Capital Growth has a rank of 30 and Stock Returns have been below market median, with a rank of 45 (55% of alternative investments were better). ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 25, is a HOLD recommendation for growth and momentum investors. While revenue growth and capital growth are good growth momentum indicators, profit is less reliable, because profits may increase due to cost-cutting measures which typically indicate negative growth momentum. "You can save a dollar only once" is the saying about such situations. Growth Investors should look at company priorities closely if they are interested in growth, because the increase in profits is not usually an indicator of growth, and stock prices have been below market, too. ...read more
Safety Strategy: Caterpillar Debt Financing Safety risky
| SAFETY METRICS | May 18, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 10 |
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| REFINANCING | ||||||||
| REFINANCING | 42 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 60 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 21 |
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ANALYSIS: With an Obermatt Safety Rank of 21 (better than 21% compared with alternatives), the company Caterpillar has much riskier financing practices than comparable other companies, which means that their overall debt burden is significantly above the industry average. This doesn't mean that the business of Caterpillar is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for Caterpillar. Liquidity is at 60, meaning the company generates more profit to service its debt than 60% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 42, which means that the portion of the debt that is about to be refinanced is above average. It has more debt in the refinancing stage than 58% of its competitors. Leverage is also high at a rank of 10, which means that the company has an above-average debt-to-equity ratio. It has more debt than 90% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 21 (worse than 79% compared with alternatives), Caterpillar has a financing structure that is significantly riskier than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usuallyl indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: Caterpillar Lowest Financial Performance
| COMBINED PERFORMANCE | May 18, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 58 |
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| GROWTH | ||||||||
| GROWTH | 25 |
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| SAFETY | ||||||||
| SAFETY | 60 |
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| COMBINED | ||||||||
| COMBINED | 14 |
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ANALYSIS: With an Obermatt Combined Rank of 14 (worse than 86% compared with investment alternatives), Caterpillar (Heavy Machinery, USA) shares have lower financial characteristics compared with similar stocks. Shares of Caterpillar are a good value (attractively priced) with a consolidated Obermatt Value Rank of 58 (better than 58% of alternatives) but show below-average growth (Growth Rank of 25), and are riskily financed (Safety Rank of 21), which means above-average debt burdens. ...read more
RECOMMENDATION: An Obermatt Combined Rank of 14, is a sell recommendation based on Caterpillar's financial characteristics. As the company Caterpillar's key financial metrics exhibit good value (Obermatt Value Rank of 58) but low growth (Obermatt Growth Rank of 25) and risky financing practices (Obermatt Safety Rank of 21), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 58% of comparable companies, may indicate the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity. ...read more
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