Caterpillar Inc. (CAT): A Small Glitch in the Best Construction Equipment Maker

Best Performance with Lowest Valuation

In 2012 Caterpillar still enjoyed decent growth in both its top line and bottom line. Sales increased from $60.14 billion in 2011 to $65.87 billion in 2012, while EPS reached $8.48, a 15% growth compared to $7.40 per share in 2011. Caterpillar is trading at $99.50 per share, with a total market cap of more than $65 billion. The market is valuing the company at 8.52x EV/EBITDA. Compared to its peers, including CNH Global NV (ADR) (NYSE:CNH) and AB Volvo, Caterpillar has the cheapest valuation. With a market cap of $12 billion, CNH is valued at 9.2x EV/EBITDA, while AB Volvo is the most expensive with 11.25x EV/EBITDA. Even with the lowest valuation, Caterpillar generated a 14% operating margin, the highest among the three, whereas the operating margins of CNH and AB Volvo were 10% and 7%, respectively.

Foolish Bottom Line

A $580 million one-time charge accounted for only 0.9% of Caterpillar’s total market cap. Thus, it had a small effecton Caterpillar’s yearly overall business performance. It might be an wake-up call for the company to be more careful in business acquisition in the future. With the highest operating margin and lowest valuation, Caterpillar remains a good choice for investors in a long run.

The article A Small Glitch in the Best Construction Equipment Maker originally appeared on Fool.com and is written by Anh HOANG.

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