June 8, 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 Dow Jones Industrial Average
Caterpillar is listed as a top 10 stock on June 08, 2023 in the market index Dow Jones because of its high performance in at least one of the Obermatt investment strategies. Only one consolidated Obermatt Rank is above-average. The company enjoys a positive professional investor sentiment, but all financial facts speak against a stock purchase. This is probably an investment into the future. Based on the Obermatt 360° View of 40 (40% performer), Obermatt assesses an overall hold recommendation for Caterpillar on June 08, 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 | June 8, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 46 |
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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 three out of four indicators below average for Caterpillar. 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 all other ranks are below average. The consolidated Value Rank has a rank of 46, which means that the share price of Caterpillar is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. The consolidated Growth Rank also has a low rank of 25, meaning that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. This means that growth is lower than for 25% of competitors in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 21 which means that 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. As only the professional market sentiment (Sentiment Rank of 74) is above-average, and all other consolidated Obermatt Ranks are below peers, the stock investing proposition case is rather weak. The stock price is expensive for a company of this size in this industry, visible in the below-average Value Rank. Growth is below the competition based on the Growth Rank, and the company has more debt than other companies, according to the Safety Rank. So the question becomes: How important is the Sentiment Rank when all others are below average? When it comes to growth, the low rating might be justified if growth is expected in the future and not yet reflected in current performance. This is often the case for companies with intellectual property, such as technology and pharmaceutical companies. In the early phases, these companies are expensive compared with their size and may have a lot of debt on their books, as is the case here, as seen in the low Value and Safety Ranks. Future growth may be the strongest investment rationale in this case, which is only reflected by institutional investors' opinions. You pay more than the market average for this stock and invest in a rather debt-loaded enterprise, but it may be worth it if the future of Caterpillaṛ is bright. A small investment might be justified, but proceed with caution. ...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 below-average critical
ANALYSIS: With an Obermatt Value Rank of 46 (worse than 54% compared with alternatives), Caterpillar shares are more expensive than the average comparable stock. 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 77 which means that the stock price compared with what market professionals expect for future profits is lower than for 77% 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 a Price-to-Book Rank of 7, which means that the stock price is lower as regards to invested capital than for 7% of comparable investments. On the other hand, Price-to-Sales is less favorable than 69% of alternatives (only 31% 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 as regards to the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 46, is a HOLD 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. Any investment optimism should only be a buy trigger once thorough research is completed. ...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 16, which means that currently professionals expect the company to grow less than 84% 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 | June 8, 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 usually 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 | June 8, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 46 |
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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 low in value (priced high) with a consolidated Obermatt Value Rank of 46 (worse than 54% of alternatives), 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 all exhibit below-average performance, such as low value (Obermatt Value Rank of 46), low growth (Obermatt Growth Rank of 25), and risky financing practices (Obermatt Safety Rank of 21), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. Such poor financial performance sometimes indicates that the company's business is all concentrated in some distant future. This is sometimes the case for high-tech or biotechnology companies. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and risky today. In such cases, the Obermatt Method has limited value as it is based on facts we can observe today. If the facts are all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that should only amount to a small fraction of a safe portfolio. ...read more
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