Caterpillar (NYSE: CAT)
Quality Value Investing Research Report | $CAT Updated Coverage | September 2025
Premium (paying) subscribers can access the Quality Value Investing (QVI) Glossary of Investing Terms and Research Report Format Guide when referencing this research report. Unless noted, all data is as of the market close on September 17, 2025, and is intended for illustrative purposes only.
In this updated coverage research report, we will reevaluate the QVI Stock Picks Real-Time industrials sector holding, Caterpillar CAT 0.00%↑, to determine if it still meets the criteria of Quality Value Investing based on our checklist analysis of the company's current wealth and the share price’s present value.
Caterpillar | Company Current Wealth
Value Proposition
Caterpillar, Inc. is a dividend-paying large-cap stock in the industrials sector’s construction machinery & heavy transportation equipment industry. It was added to the QVI Real-Time Stock Picks on July 3, 2023, at a $240.10 cost basis per share, adjusted for dividends paid to cash.
Caterpillar, Inc. manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives in worldwide. The company was founded in 1925 and is headquartered in Irving, Texas USA.
Economic Moat
Morningstar assigns Caterpillar a wide moat rating, based on its significant intellectual property and high customer switching costs.
QVI’s Value Proposition Elevator Pitch for CAT:
Caterpillar is one of the world’s most valuable and recognizable brands, providing customers with reliable, high-quality products while offering the lowest total cost of ownership.
QVI’s value proposition rating for Caterpillar: Bullish.
Returns on Management
Revenue Growth and Profit Margins
According to the table below, Caterpillar’s trailing five-year annualized revenue growth was in the positive mid-single digits. However, the company’s revenue growth of -4.9% lagged the S&P 500’s +17.8% for the most recently reported twelve months.
Further down the income statement, Caterpillar reported a double-digit positive net profit margin, driven by a cost-of-goods-sold gross margin, while underperforming the S&P 500’s net margin of 22.7% from its 54.6% gross margin.
Returns on Equity and Invested Capital
Caterpillar's senior management achieved a high-double-digit return on equity (ROE), more than quadrupling QVI’s targeted threshold and aligning with the S&P 500’s ROE of 47.5%.
Stock buyback programs often boost ROE. For example, Caterpillar Inc. announced a $21.8 billion share buyback in June 2024 to return cash to shareholders. This event was approved following strong financial results from the ME&T segments and aims to increase shareholder value.
Caterpillar’s return on invested capital (ROIC) was above QVI’s threshold but lagged the broader market’s 24.8% return. In addition, Caterpillar’s ROIC modestly exceeded its weighted average cost of capital, or WACC, demonstrating that its senior executives are adequate capital allocators.
Owners’ Earnings
In a further test of shareholder value, the five-year trailing current wealth of owners’ earnings for Caterpillar, or EPS growth plus dividend rate growth annualized, was positive double-digits, an excellent rate of return for stockholders.
QVI’s business fundamentals rating for Caterpillar: Bullish.
Next, we’ll examine the company’s enterprise downsize risks, the present value of the stock price — including shareholder yields and share price downside risks — and conclude with the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
