Fundamental Analysis


For more than 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets.

With 2017 sales and revenues of $45.462 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three primary segments – Construction Industries, Resource Industries and Energy & Transportation – and also provides financing and related services through its Financial Products segment.

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Reasons to buy – CATERPILLAR

High level decisions on buy or sell for a stock should be driven by

1. The margin that the company makes. i.e. Out of $1 that the company sells how much does the company taken home.

    • Here we see CATERPILLAR makes a margin of 16% on Gross Level and about 13% on Net level. This means that out of $1 that it makes $0.13 is being pocketed as profits. This is among the best margins across a ton of companies.

2. The growth rates of the company on revenue, net income, EPS and Dividend. i.e. If it sold $1 last year how much more did it sell this year.

    • Here we see net revenue growth of 30% in the revenue and the net profit figures grew by 767%. The huge increase in Net Profits was mostly due to the improvement in the Operating Margin which is a good sign.

3. The efficiency ratios of the company on Equity and Assets. i.e. How well is the company able to sweat each $1 that it puts to work in the company.

    • Here we see CATERPILLAR makes a Return on Assets of 8.5% and Return of Equity of 43% which is pretty good.

Now the only negative that is obvious is the high Debt/Equity. If we look at the Interest Expenses carefully we can see that it forms a very small portion of the revenues and the Long Term debt itself is a very small portion of the Total Liabilities. Being a Company that encompasses the entire bandwidth of infrastructure related projects across the world, this is a stock that is worth investing.

All these ratios can be found in the attached excel sheets and are based on the EDGAR report submitted by CATERPILLAR to the SEC. All the data on the above analysis can be found at the link below

Balance Sheet

Income Statement

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