Caterpillar Inc. (CAT): investment thesis checklist
What a value investor writing down why they own Caterpillar Inc. would be relying on, read from its filings: the figures that have carried the business, the lines a reader might set on them, and the published tests it meets today. A list to write against, not a view on the company.
1. The figures the case would rest on
- Return on invested capital: 17.6% in FY2025; between 9.8% and 24.2% over 7 filed years, median 16.8%. Does the thesis need it to stay inside that range?
- Return on equity: 41.7% in FY2025; between -0.5% and 55.4% over 10 filed years, median 41.7%. Does the thesis need it to stay inside that range?
- Free cash flow yield: 3.3% in FY2025; between 3.3% and 8.4% over 10 filed years, median 5.5%. Does the thesis need it to stay inside that range?
- EV to EBIT: 26.68x in FY2025; between 12.98x and 26.68x over 7 filed years, median 19.27x. Does the thesis need it to stay inside that range?
- Price to earnings: 30.46x in FY2025; between 12.38x and 125.06x over 9 filed years, median 17.48x. Does the thesis need it to stay inside that range?
- Gross margin: 33.8% in FY2025; between 27.2% and 38.0% over 10 filed years, median 31.6%. Does the thesis need it to stay inside that range?
- Operating margin: 16.5% in FY2025; between 3.0% and 20.2% over 10 filed years, median 14.3%. Does the thesis need it to stay inside that range?
- Net debt to EBITDA: 2.01x in FY2025; between 1.50x and 2.76x over 7 filed years, median 2.19x. Does the thesis need it to stay inside that range?
- Revenue growth, 5-year CAGR: 10.1% in FY2025; between -8.5% and 10.1% over 10 filed years, median 1.7%. Does the thesis need it to stay inside that range?
- Share count change: -3.5% in FY2025; between -5.3% and 2.6% over 10 filed years, median -3.2%. Does the thesis need it to stay inside that range?
2. What must stay true: guardrails a reader might set
Each line is drafted from Caterpillar Inc.'s own current figure, never from a level we think a business should clear, and replayed over its filed years. They are a reader's to keep, edit or drop.
Debt to Equity stays at or below 2.16x
Today 1.73x. Replayed over 7 filed years, it would have broken in 1; most recently FY2019, at 2.2x (10-K, filed 2020-02-19).
Revenue Growth 1Y stays at or above 0%
Today 4.29%. Replayed over 10 filed years, it would have broken in 4; most recently FY2024, at -3.36% (10-K, filed 2025-02-14).
Return on Invested Capital stays at or above 14%
Today 17.56%. This indicator depends on inputs (market price, multi-statement composites) whose history is not deep enough to re-derive it with the same formula as the live value, so no honest retro-test exists for it.
3. What would break it
- A filed year in which debt to equity rose above 2.16x.
- A filed year in which revenue growth 1y fell below 0%.
- A filed year in which return on invested capital fell below 14%.
4. The published tests it meets today
Of 30 tests value investors published: 2 met, 28 not met, 0 we could not complete. Counts, never a score.
Meets: ROIC at or above WACC; Cash-covered dividend.
What this cannot tell you
What the numbers say today, not the day one stops being true. The reasons are not written down.
An account adds
One email the night a number you wrote down breaks. Silence otherwise.
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How this is computedA computation on accounts filed with the SEC, not a recommendation and not advice. Past filings do not indicate future results. Risk disclaimer.