CAT DCF Analysis: Intrinsic Value Far Below Recent Price

GuruFocus conducted a discounted cash flow (DCF) analysis for Caterpillar Inc. (CAT) to determine its intrinsic value in light of recent price performance. The stock has experienced significant growth over the past year, but recent trends indicate volatility.

The DCF earnings-based model used a two-stage approach to estimate CAT's intrinsic value. It projected earnings growth over the next ten years and then applied a terminal phase with a more conservative growth rate. The key assumptions included a 10-year Treasury rate of 4.96%, a discount rate of 11%, and a terminal growth rate of 4%.

The calculation summary showed that CAT's intrinsic value based on earnings was $621.00, while its free cash flow (FCF)-based intrinsic value was $427.61. The current price of $818.57 indicates that CAT is significantly overvalued, with a margin of safety of -31.8%.

GuruFocus' proprietary measure, GF Value™, also provided a third perspective on CAT's valuation, standing at $459.42. All three models align in indicating that CAT is overvalued.